Five key pay and reward trends from our Spring UK Reward Management Survey 2018

Business optimism remains whilst the UK defines what ‘leave’ looks like

Definitive detail on what Brexit means remains elusive despite passing the second-year anniversary of the UK’s decision to leave the European Union. Previous surveys have tracked businesses and consumers’ continued reluctance since the 2008 recession to plan for the long-term. Delayed investment decisions and incremental, if any, pay increases have characterised the last decade. Ensuring that reward arrangements support recruitment, retention and career planning whilst remaining within steadily constrained budgets has remained the status quo.

Whilst meeting organisations’ immediate needs remains the priority, figures suggest that HR budgets may be gradually increasing alongside projected orders, revenue and profitability. More respondents (60 per cent) expect revenues to increase (compared to 54 per cent in autumn 2017) which may suggest that they are expecting better trading conditions for this year. With 50 per cent of respondents also expected to increase their pay award budgets by up to three per cent, it will be interesting to see whether these results signal the start of longer-term planning and increasing pay levels.

Pay awards remain consistent and out of cycle awards are more commonplace

More organisations are using a combination of across the board and individually-determined increases, with 36 per cent choosing this method: a nine per cent increase since our last survey. However, whilst wage growth projections show a slight increase to three per cent for 2018, two per cent remains the most common pay increase. Two thirds of employers tell us that their annual pay increase is driven by how their pay compares to the external labour market and the recruitment and retention outlook remains steady, suggesting that pay rewards will be in keeping with this trend.

One third of respondents have used out of cycle pay increases, with the most common pay increases being up to one per cent and up to three per cent of respondents’ annual budgets. Whilst respondents said that the most likely reason for out of cycle pay increases is individual employee promotions, others did acknowledge that remedying the pressure of inflation was a factor.

Bonuses continue to reflect seniority and are performance-led

The outlook on bonuses this year looks stable. Nearly two thirds of organisations (64 per cent) expect the number of people receiving bonuses over the next twelve months to be unchanged from 2017 and just over half (51 per cent) expect the bonus levels to also be the same. More organisations are expecting an increase in the number of people receiving a bonus than a decrease.

Gender Pay reporting deadline

Whilst a quarter of respondents in the autumn 2017 survey said it was too early to tell when they planned to publish their compulsory gender pay data, the majority of companies who responded to our spring survey had either already published or intended to publish their data around the reporting deadline; the remaining respondents are likely to be exempt from reporting.

Given the reporting deadline, perhaps not surprisingly, there has also been an increase in the number of respondents who publish data externally, with 57 per cent publishing externally as opposed to three per cent in 2016. Equally there was a noticeable jump in those having completed the overall implementation from 43 per cent in autumn to 73 per cent. The continued focus for many organisations remains how they can meaningfully explain their data to key stakeholders as the median gender pay gap amongst respondents ranges between 7.0 and 30.2 per cent.

The apprenticeship levy continues to raise challenges

The majority of respondents either feel positive about the levy or are ambivalent, in keeping with recent surveys. However, fewer respondents expect their number of apprentices to increase this year (33 per cent) compared to last year (40 per cent) which may be linked to the issues raised by respondents which included queries around cost and administration. However, fewer organisations intend to treat the levy purely as a tax. The levy is consistently expanding the range of jobs trained for via apprenticeships and being used to upskill existing employees. Whilst the levy is in its second year of operation, it is interesting to see that challenges around the mechanics still remain. The levy undoubtedly means different things to different sectors, but across the board, affected employers are continuing to adjust.