What are the 5 key reward trends facing HR professionals in 2022?

1. A buoyant labour market

The UK jobs market remains buoyant. The labour market is particularly challenging given the backdrop of pay. Pay increases have been constrained for years, just tracking above inflation, as we have consistently reported two per cent pay rises. This year, we are seeing a return to the three per cent pay rises that had just started to become more popular before the pandemic, however this now falls below official levels of inflation which are set to rise. Given the rail strikes and the potential strikes of airline staff, particularly those at BA who accepted a 10 per cent pay cut during the pandemic, these pressures on pay are threatening a ‘summer of discontent’.

The strain on pay levels creates corresponding pressures on pay and reward frameworks. Having a robust system in place that looks at total reward and the value employees derive from their pay, benefits and the culture of the workplace, is in a stronger place to drive down employee turnover, which is predicted to increase for all employees from 31 per cent in spring 2021 to 44 per cent. Employers are considering how to reduce employee turnover, with 84 per cent set to benchmark pay; 81 per cent running opinion surveys to understand their people and what they truly derive value from; and 75 per cent planning to review their total reward framework in 2022. We have received an increase in enquiries about Total Reward Statements so that employees can see the full value and investment that an employer offers employees.

2. Bridge the gap between pay awards and rising inflation

The demands facing employers when it comes to pay, and balancing this with affordability, causes huge pressure on pay frameworks. The most common pay review for 2022 is up to three per cent; the number of respondents awarding this increase has nearly doubled since last spring from 22 per cent to 42 per cent. The one per cent of respondents awarding up to four and five per cent increases one year ago has significantly increased to 28 per cent and 15 per cent respectively.

Redundancies are at an all-time low. Just one respondent reported any plans to freeze pay in 2022, with their use declining since the autumn 2020 survey when 24 per cent operated a pay freeze at the height of the pandemic. This may increase once again, given that employers increasingly face the challenge of balancing constrained wider economic growth and affordability with fair pay that enables employees to access meaningful pay awards. Employers are increasingly using out of cycle pay increases, which exclude adjustments for pay promotions, and bonuses to cushion the impact of constrained pay on employees.

3. Consider wider talent pools

Employers are increasingly considering whether they are accessing diverse talent pools and offering fair opportunities for all. The disproportionate impact of the pandemic is well documented. The Equality and Human Right Commission and Government Equalities Office suspended their enforcement of the gender pay gap 2019/20 reporting year and delaying the deadline for the 2020/21 data to October 2021. Despite this, 6,000 of the 10,000 employers in 2020 still voluntarily published their data according to the CIPD, demonstrating the commitment of many employers to closing the gap. However, the median pay gap reported by respondents is 15 per cent, an increase from 14 per cent in spring 2020. This might be due in part to the make up of the respondents, but tracking concrete actions to address the pay gap is crucial to achieve progress going forward.

“ 22 per cent of respondents acknowledged that they have improved their benefits provision to mitigate constrained pay reviews."

Employers had anticipated compliance requirements being widened to beyond gender gap reporting to cover ethnicity pay gaps. Instead, the government did not make this mandatory and will shortly be publishing guidance for voluntary reporting, which is designed to bolster diversity and inclusion initiatives. However, 81 per cent already have a wider equality, diversity and inclusion policy in place. Whilst further clarification on reporting is helpful, the initiatives alone may not be enough to track the ethnicity gap. Employers are increasingly interrogating their pay figures in relation to their demographics to monitor and make meaningful change, with 73 per cent analysing their ethnicity data; 47 per cent investigating their data based on age; and 50 per cent reviewing disability pay gaps.

4. Support employees through crucial lifetime milestones

Employers are increasingly looking at the total value they offer their employees. This extends to how they can provide designated leave for critical moments of an employees’ lifetime. 52 per cent recently reviewed menopause leave; 37 per cent recently reviewed leave for charity/voluntary work; and 36 per cent recently reviewed the leave offered for those with dependents. 29 per cent have also reviewed the leave they offer to carers and 18 per cent reviewed leave for those undergoing fertility treatment.

The growing awareness of important milestones like the menopause and fertility treatment and how it can affect the individual is being more widely discussed in the mainstream media. Furthermore, the pandemic also highlighted the increasing blend of family and professional life, as many had to work around their children making appearances on zoom calls, being unable to compartmentalise work and home life. For the 36 per cent who have reviewed leave policies for emergency family leave for dependents, it is important to recognise the need to support employees trying to achieve a better work/life balance. This also encompasses offering designated leave for charity and voluntary work which can also align with the values of the organisation. Individuals and their priorities are being increasingly viewed holistically.

5. Underline the employee value proposition and outline total reward

This time last year, the pandemic meant that we captured the lowest levels of recruitment and retention difficulties we have seen since the 2008 economic recession. Respondents are now reporting a surge in recruitment and retention challenges that they have experienced over the last six months, which is set to continue throughout 2022.

Employers are having to be more innovative with budgets and bolster their approach to total reward. 22 per cent of respondents acknowledged that they have improved their benefits provision to mitigate constrained pay reviews. Underlining the wider value they offer when it comes to supporting issues that employees care about – from embedding diversity and inclusion to flexible working and greater support at critical lifetime milestones such as fertility treatment or the menopause – can reduce the pressure on pay frameworks in the current economic climate.

Get in touch

We hope that highlighting these key trends helps you in planning your own approach to your HR strategy in 2022. We always appreciate the time respondents take to contribute their views to our UK Reward Management Survey, which has enabled us to track pay and reward practices for well over a decade now.

We are on hand to help you manage your pay and reward practices to get the most out of your people and to cultivate a strategy that delivers real value to them. If you have any questions at all about the results, or require any support, please contact us.

Register here to contribute your views to our next UK Reward Management Survey in autumn 2022.