As Paydata’s UK Reward Management Survey marks its tenth anniversary, we highlight the key trends in pay and reward that have emerged over a decade.
Paydata first launched its UK Reward Management Survey in 2009 to capture the economic downturn’s impact on the pay and reward landscape. With its recent spring edition in 2019, Paydata have analysed ten years’ worth of information and trends, as the survey has tracked the rate of recovery in the world of HR and reward.
Here we outline the six topics that we have consistently asked HR and Reward specialists about since 2009, charting the changing landscape of HR in its recovery from the 2008 recession.
1. Business outlook has markedly improved but remains cautious
Between 2009 and 2010 we captured notable recovery as the economy left behind the recession. Optimism around business revenue has increased year on year.
In 2009, business optimism was at its lowest as the UK amidst the recession. 53 per cent expected a decrease in their revenue. The outlook picked up swiftly by 2010, with those expecting a decrease dropping to 18 per cent. This gradually reduced to around only five per cent expecting reductions in revenues in the last five years. Between 2009 and 2010 the percentage of organisations expecting a revenue increase jumped from 12 per cent to 55 per cent. Optimism peaked in 2015 with 74 per cent expecting an increase, just before the start of political uncertainty around Brexit in 2016.
In 2009, 58 per cent expected profitability to decrease, which dropped to 11 per cent in 2010. Since 2010 the percentage of those expecting an increase has gradually grown to 60 per cent, but the gradual year on year increase of these respondents has again leveled off since 2015, as the uncertainty of what Brexit will mean for trading conditions constrains optimism around trading conditions.
2. Pay review budgets remain subject to economic pressures
Pay review levels have remained steady since 2015, tracking inflation. This has resulted in a real terms pay cut over time, with employers increasingly resorting to creative measures around pay to attract and retain. We have recently started to monitor out of cycle pay increases potentially being used to address market and economic pressures, as 81 per cent of respondents used these in 2018. In 2019, two thirds had to offer new recruits salaries that conflict with those paid to existing employees, an increasingly popular recruitment tool.
Pay review budgets were highest in 2014, as 54 per cent predicted pay review budgets of between two and three per cent. Between two and three per cent remains the most popular pay increase for 2018 and 2019.
The number of respondents opting for an up to four per cent increase jumped from two per cent in 2017 to seven per cent in 2018, which is consistent with the spring 2019 result of 10 per cent. This demonstrates the overall positive progression in pay that is being made after a decade of relatively flat wage growth.
Pay freezes have declined from 23 per cent in 2009 to five per cent in 2019. However, only one per cent of respondents in 2018 indicated that there would be no pay reviews, indicating that pay freezes are potentially on the rise in some sectors.
3. HR embraces recruitment and retention challenges
Two key drivers have consistently driven pay review targets: external relativities and recognising high performing people. These priorities reflect employers aiming to retain top talent and pay competitively in the market.
Long-term incentive plan design has reduced from being on 43 per cent of HR agendas to 27 per cent in the last 10 years. This form of incentive is less and less a focus, which in many ways reflects the changing workplace. We are constantly talking about the future of work with our customers and how flatter hierarchies with more immediate feedback are replacing the traditional model of loyalty, in which you work your way up the ladder towards a delayed incentive.
4. HR budgets improve but remain constrained
Since the recession, HR budgets have consistently improved. HR headcount budgets are now steady, slightly increasing since 2009. 54 per cent expected a positive increase or no change to their budget in 2009 in comparison to 83 per cent in 2019.
Budgets for day-to-day costs remain constrained. In 2009 budgets were being actively reduced for 54 per cent of respondents whilst 38 per cent did not expect any change. In 2019 21 per cent also face reduced budgets, but more employers (57 per cent) anticipate levels to stay the same. HR teams need to continue to deliver within limited financial parameters.
Budgets available for training and development are increasingly ring-fenced. In 2009 54 per cent experienced a reduction in budget, as opposed to 14 per cent 2019. 51 per cent in 2019 expect budgets to remain unchanged, in contrast to 32 per cent in 2009.
There is also more opportunity for projects and new development costs and reward management costs. Following the recession, around 40 per cent faced an active reduction in these budgets. The majority of respondents, around 80 per cent, now face no change or positive increases to these budgets.
5. HR adapts to boost equality and diversity
Interest in equal pay studies peaked in 2016 where it featured on 71 per cent of organisation’s agendas, compared to 26 per cent in 2012. Whilst only 46 per cent feature equal pay as a priority in their 2019 HR agenda, this might be because of the wider corporate governance initiatives in place in companies such as the gender pay gap regulations, CEO pay ratio regulations and ethnicity pay gap reporting, all of which are part of this wider push for equality.
In our most recent UK Reward Management Survey for spring 2019, we focused on diversity and equality as a broad topic instead of focusing on discrete initiatives. 58 per cent of employers are already reviewing their ethnicity pay data, 44 per cent are looking into their demographic data regarding disabled employees and 42 per cent are reviewing age. These initiatives shine the spotlight on fairness and the practices organisations have in place to increase equal opportunities.
6. HR agendas
Getting the basics right has consistently featured on top agenda items, with the most popular three items over a decade being pay benchmarking, reward strategy and employee opinion surveys.
This focus on reward and actively listening to employees is critical to overcoming recruitment and retention issues that employers continue to face. The top three priorities suggests that pay decisions are being designed holistically, with regard to the wider market conditions set in context with direct feedback from employees themselves.
Focusing on competitive pay and addressing employee satisfaction through opinion surveys is perhaps a direct result of limited budget that HR teams have faced over the last ten years and ensuring that employee turnover rates remain steady by managing employee engagement.
As definitive detail on Brexit continues to be delayed amidst a leadership contest, ongoing political turbulence contributes to the pressure that remains on HR teams to achieve more with less. Teams have to think outside the box to work within constrained budgets that have dominated the HR landscape over the last decade.
What will the next 10 years bring?
In our tenth year of running the survey, we have received excellent engagement and the results represent nearly half a million employees in the UK. We continue to build the survey as an authoritative source of information, insights and trends and would like to thank those who contributed their views and recommended the survey to others.
Have your say: Register now to contribute your views to Paydata’s UK Reward Management Survey Autumn 2019.
Download your copy of the full infographic covering a decade of pay reward trends