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Our UK Reward Management Survey has revealed the impact of the National Living Wage on pay budgets for 2024. The survey, which has been running for 15 years, is designed to keep HR professionals and employers informed about what is happening in the world of reward management across the UK.

As well as covering current practices regarding pay and bonuses, this edition tracked topical issues impacting employers including managing employee performance and productivity; flexible/hybrid working practices; recruitment and retention challenges; and absence and labour turnover.

Here we outline the key trends highlighted by the results.

1. Sustained high pay awards

April remains the most popular month to make pay awards for the majority of respondents, therefore many employers have already made decisions around pay for 2024. The median pay review for 2023 was five per cent; and for those affected by the National Living Wage (NLW), this is staying around the five per cent mark. For context, only three per cent of employers offered this level in 2021, when two to three per cent increases were common.

For employers who are unaffected by the rise, the median is around four per cent, reflecting how the NLW equates to a median additional increase on the pay bill of around over one per cent. The increase in the National Living Wage that came into effect in April 2024 is impacting employers who have had to budget for an additional one per cent as a direct result of the increase, particularly for healthcare, housing associations, facilities management and residential care sectors where they have a high population of roles at this level of pay.

Many are carrying out compression analysis to help maintain competitive pay levels. By monitoring the effect of the upward pressure on pay created by the NLW increase, employers are keen to ensure they are offering meaningful pay awards to employees that reflect the role and any responsibilities.

Fewer employers are offering additional financial lump sums to support staff affected by the cost of living. Despite the fact that employers and employees continue to face rising costs, only 2% have decided to pay a lump sum of a reduced median amount of £575. This contrasts to 2022 where one third of employers reported paying a lump sum to support employees of a median £750.

2. Performance and productivity

Many employers have implemented record pay increases in the last two years, alongside experiencing significant cost increases in other areas. Budgetary pressures faced by employees and employers alike means there has been an increased focus on productivity. However, building a high-performance culture requires buy-in across the organisation. With a greater focus on affordability, many are introducing a more robust performance management framework and clearer objectives in order to maximise productivity. The survey explored how employers are shifting their focus towards encouraging and rewarding employee performance and productivity.

Just over half of respondents said that they have, or are considering, adjusting their reward strategy to place a greater emphasis on performance and productivity. This indicates the greater focus on linking pay and performance as a way of balancing affordability and maximising profit for the direct benefit of employees.


Download the key findings from the UK Reward Management Survey Spring 2024.

Download UK Reward Management Survey Spring 2024 - Key Findings(pdf)

Line managers will remain key, facilitating effective conversations that translate into defined objectives that truly drive productivity and maintain employee engagement. When discussing productivity, managers are tasked with the delicate balancing act of framing the conversation between delivering optimum value for the business, while not adding undue stress or undermining wellbeing initiatives that the organisation want to support.

3. Flexible and hybrid working arrangements

The majority of respondent employers, 66 per cent, have a formal policy in place to define hybrid and flexible working. For many employers, navigating flexible and hybrid working arrangements following the pandemic has been a challenge. Front-line workers are inherently more limited in terms of what they can access in terms of flexible working arrangements, as certain employees are required to be in the office or onsite to fulfil their role.

However, employers are having to be more innovative when it comes to employees and their ability to shape their working arrangements, which is highly valued by staff. 53 per cent are given the ability to swap shifts, and 40 per cent can input into shift and rota schedules, while 43 per cent have flexibility in their start and finish times.

Hybrid working and flexible working arrangements continue to be a delicate balancing act between the business needs of employers and the wishes of employees. Defining a policy that works not necessarily across a whole organisation, but works based on different teams and their requirements is something that may require trial and error to reach an equitable and motivating solution. Even for those who have a formal policy in place, it is important to understand that there is often no ‘one size fits all’ approach.

The challenge to remote-based working is the effect this has on culture and career progression. Younger generations, in particular, often learn by osmosis. With fewer chances to shadow in person, and for teams as a whole to chat generally, the effect on culture is an important consideration. One third of companies currently tracking on-site attendance. Over half are not tracking attendance, while three per cent are planning to implement monitoring of their employees’ presence in the office. There is a greater onus on leaders and managers to be intentional about facilitating more opportunities to collaborate and facilitate cohesive teams.

4. Recruitment and retention

There is an ongoing shortage of skills across the labour market. Whilst employers continue to compete for top talent, fewer respondents have experienced retention problems overall. 41 per cent have experienced difficulty in retaining people, which has significantly reduced from 64 per cent in spring 2023.

In the next six months, the labour market is set to remain competitive, but fewer people anticipate retention difficulties. 40 per cent is a significant contrast to levels reported in spring 2023, where 61 per cent anticipated retention challenges.

Over the last two years, there has been a steady decline in recruitment challenges. At the height of recruitment difficulties being experienced by employers, our spring 2022 survey highlighted how 85 per cent of respondents were experiencing difficulties in recruiting people. This has reduced to 61 per cent of respondents reporting challenges in the last six months.

Fewer respondents expect recruitment challenges over the next six months in comparison to the height of the buoyant labour market in 2022. 54 per cent anticipate recruitment difficulties in the next six months, in comparison to 86 per cent in spring 2022.

Half of employers are offering salaries to new recruits that conflict with those paid to existing employees. This demonstrates how higher salaries are being used as a recruitment tool, with 78 per cent offering new recruits up to 10 per cent more than they pay to current incumbents and 20 per cent having to offer up to 20 per cent more.

Half of employers are offering salaries to new recruits that conflict with those paid to existing employees, demonstrating how higher salaries are being used as a recruitment tool.

5. Absence trends

The effect of long-term ill health has made the headlines recently, with many employers asking how they can best support their staff who are affected. The median absence in 2023 was around 3.8 days and it is 3.6 days so far in 2024. This is slightly higher than during the pandemic and subsequent lockdowns, when there was a slightly lower median of three days.

The figures could reflect the make-up of the respondents and different sectors between surveys, or it could suggest that fewer sick days were required during the pandemic when fewer people had to struggle into the office when feeling unwell, given the uptake in working from home during this period.

6. HR budgets and agendas

Autumn is the most popular time to set HR budgets for the year ahead amongst the respondents so far. Around half of respondents do not expect any change to budgets across the board. Employee opinion surveys are a key priority for HR agendas in 2024, to drive down employee retention and understand what elements of total reward strategies are working and easily identify what could be tweaked.

Pay benchmarking is the next most popular priority for HR agendas in the year ahead. This reflects how paying competitively in the market and for the role is essential for attracting and retaining the right talent in organisations. People want to know that they are being paid fairly, and competitively in the market or sector, and this makes benchmarking essential. This is closely followed by benefits benchmarking, to ensure that the benefits package being offered by the company matches the range of rewards on offer at competitors.

Get in touch

Register here to contribute your views to our next UK Reward Management Survey. We produce a summary report of the results that is emailed to participants, which makes it impossible to identify individual answers, so rest assured that we keep all information confidential.

Data for the survey was collected from the end of March through to the end of May 2024. Responses from HR and Reward professionals across 198 employers reflect trends representative of HR practices affecting more than 400,000 employees, so thank you to all those who took part. We hope the insights are helpful to you when designing and reviewing your total reward strategy.

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