Key emerging trends in UK Reward Management

1. A widely varying outlook on pay

In a week of local elections, pay is a key focus amid ongoing strike action across a number of public services. Reported pay awards vary widely, which is why benchmarking is so important when factoring in the sector and wider market activity to ensure pay levels remain competitive in a volatile market.

April pay reviews remain the most common among initial responders, with around one third of respondents having already set their pay review levels for 2023. To date, 4 in 5 respondents expect pay awards to be driven by external relativities, including inflation.

After years of pay levels tracking inflation, the pressure on pay awards since we started collecting data for our UK Reward Management Survey has never been greater. With UK inflation remaining stubbornly high, employers continue to struggle to offer meaningful pay awards. Median pay expectations currently sit at five per cent, however we are seeing the highest increases since the survey began, with increases of eight per cent plus not uncommon.

2. Identifying how best to support employees through the cost of living crisis

With such pressure placed on pay awards in light of the cost of living crisis, millions across the country are facing soaring bills. Employers are increasingly calling these payments one off, non-consolidated lump sums, to avoid tying them directly to the ongoing cost of living crisis.

The language around the crisis is important internally, as inflation remains high and sustains the pressure on employers to adjust pay accordingly. However, given the traditional fluctuating levels of inflation, combined with more optimistic forecasts for inflation figures towards the end of the year, it is hoped that this might ease pressure on employees and employers alike who are both facing escalating costs. Employers granting one-off payments helps their attempts to balance affordable pay awards with their constrained budgets.

“Two thirds of senior business leaders agree that employers have a responsibility to their employees and supporting them during the cost of living crisis.”

A recent study by the Work Foundation at Lancaster University reveals two thirds of senior business leaders agree that employers have a responsibility to their employees and supporting them during the crisis. The findings of the report ‘Shifting sands: Employer responsibility during the cost of living crisis’ also echo our data so far which tells us that 38 per cent of employers who paid a lump sum to bridge the gap between rising costs and take home pay in 2022. The median amount paid by respondents last year was £750.

3. Benefits tailored to individuals

During the pandemic, we noted that employers were ensuring they were truly taking into consideration the wellbeing of employees on a holistic basis, beyond their 9-5 roles. Employers were more aware of the role they play in extending greater support to employees, ensuring they were supported mentally, physically and emotionally with targeted benefits and comms plans.

This remains the case with more employers introducing policies to accommodate milestones in employees’ lives, such as fertility treatment and the menopause. Our survey also explores whether employers offer flexible benefits to enable employees to select the benefits that they value the most.

Pensions are the most popular benefit on offer, but there are indications that some employees are opting to reduce contributions to the pension scheme to cushion immediate take home pay levels in the short term. The cost of living crisis is shaping benefits packages as 78 per cent offer access to financial advice, including through their Employee Assistance Programme, while 60 per cent offer financial wellbeing workshops. 65 per cent are offering promotions to reduce spending by employees, while 55 per cent are directly allowing working from home to reduce travel costs.

4. Examining organisations’ D&I record

With renewed calls by the TUC to make ethnicity pay gap reporting mandatory following these plans being rejected by the government last year, building a fairer and more equal society remains a key objective of many organisations and their approach to business. Coming under the umbrella term of ‘Environmental, Social and Governance’ used to govern corporate policies and screen tenders and investments made by companies, diversity is a key pillar that companies increasingly safeguard.

Creating tangible change is the challenge, with one in five respondents so far saying that they have a diversity and inclusion policy but intend to review it. Around half of respondents to the survey so far report that they are happy with their current policy.

The business case is well established, creating effective teams that reflect the society organisations serve and fuelling innovation with a greater number of opinions and approaches. However, it is also important to the culture of a company, with 90 per cent of Gen Z and millennials considering leaving their workplace for one that better reflects their values. The survey report will explore the most effective initiatives that respondents have put in place.