Every now and again we like to invite guest bloggers to offer HR expertise to the employers who read our blog – and this month we are delighted to have a contribution from Tim Kellett, Director of Reward Management Consultancy Paydata. Tim has helped hundreds of employers with their pay and reward strategies to unlock the full potential of employees. With over 20 years’ experience in pay and reward, Tim is a passionate HR specialist.
Paydata’s Spring UK Reward Management Report 2019 marks the tenth anniversary of their bi-annual survey, which explores business trends, pay practices and HR agendas in the world of reward.
Paydata’s top five trends
Here Tim outlines the five top trends from the survey that are affecting employers at a national and regional level when it comes to recruitment, retention and pay:
1. Business optimism remains steady despite Brexit remaining an unknown
Clarity around Brexit continues to be elusive, as the deadline to leave has been extended until 31 October 2019, with no deal increasingly being a possibility. However, business optimism remains steady during this period of political turbulence:
- 57% of respondents expect revenues to increase
- 50% expect profitability to increase.
- 1/5 felt it is too early to tell.
- Regional projections are in line with this pattern.
2. Pay awards remain constrained
The most common pay increase amongst respondents based in the Peterborough area is 2%. This is lower than the national average across the UK, where up to 3% pay increases remain most popular, after a decade of relatively flat wage growth.
In fact, whilst 5% of respondents nationally reported pay freezes, this was significantly higher regionally, with 15% experiencing a pay freeze in the Peterborough region. The two most quoted drivers for pay increases are external and internal relativities.
3. Out of cycle pay awards supplement pay increases
We are monitoring the practice of granting out of cycle pay increases, as organisations increasingly use these to bridge the gap between official pay review figures and wider market pressures.
Across the UK, 81% used out of cycle pay increases in 2018, whilst only 48% anticipated using these types of increase in our autumn report. This is a growing trend, which is also reflected in regional figures, as 67% anticipate granting out of cycle pay increases in 2019. 47% cite market pressures as a key driver.
4. Equality and diversity initiatives drive cultural change
The topical focus for Paydata’s spring survey was equality and diversity initiatives, as the ethnicity pay gap is the next potential corporate governance measure to be is implemented to promote fair pay for all.
We have monitored the tremendous impact that gender pay reporting has made as a discrete initiative, with those publishing their data externally rising from 3% in 2016 to 69% nationally in 2019. However, progress remains slow with an average median pay gap of 16.3% with an interquartile range of 8.8% and 24.7%, which shows little improvement from 2018 figures. Similarly, at a regional level, this average is 14%, with an interquartile range of 9.3% and 27.2%.
Regionally, 1/3 of respondents are actively considering how they can tackle wider equality issues within their organisations, beyond discrete initiatives such as the reporting requirements regarding gender pay and potentially ethnicity pay gaps. 67% of employers offer equality and diversity initiatives.
The most popular initiatives are designed for the short term to effect long term changes to the workplace, with the top three being:
- Networking groups (designed to bring together under-represented groups to support their progression);
- Dedicated working groups (open to all employees to champion diversity within the workplace); and
- Development programmes (more individually focused and built into performance management to provide dedicated training and support).
5. Recruitment and retention challenges persist for employers
Nationally, 62% expect retention issues to persist in the next 12 months, in contrast to 40% in spring 2018. 66% anticipate recruitment difficulties in the next 12 months. Loyalty no longer equates to larger pay packets, as 2/3 of organisations have had to offer new recruits salaries that conflict with those paid to existing employees. 69% of respondents have had to offer up to 10% more.
In contrast, fewer employers regionally have had to offer salaries that conflict with those paid to existing employees – only one third of employers have had to use this as a recruitment tool. 35% expect retention difficulties over 2019, whilst 59% anticipate difficulty in recruiting people. Regional employers are more hesitant about the recruitment and retention landscape, with nearly one quarter of respondents saying it was too early to tell with regards to attracting and retaining people over the next 12 months.
Employers increasingly must be creative in their approach to reward and benefits to effectively attract and retain talent, as limited HR budgets persist. Pay benchmarking, employee opinion surveys and reviewing the pay review process featured high on HR agendas for the year ahead, suggesting that the focus is on managing employee engagement as a key tool to attract and retain the right talent.
With increasing pressure on HR teams to achieve more with less, teams have to think outside the box to meet increasing demands with constrained budgets that continue to dominate the HR landscape of 2019.
Download the key findings from Paydata’s UK Reward Management Survey Spring 2019 and sign up to receive notifications about the next running of the survey. To talk to Tim Kellett about any aspect of pay and reward, please call 01733 391377 or email firstname.lastname@example.org.