Karen Fletcher: Employers beware: difficult pay conversations ahead

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“Britain needs a pay rise”. This is the slogan being heralded by trade unions and their members all over the UK and has led to a renewed focus in the media on pay in the UK. We have also recently seen midwives and other NHS professionals striking for the first time in over 30 years over a pay dispute. Unions are planning further strikes within the NHS next month following Jeremy Hunt’s decision to ignore the advice of the NHS pay review body to award a 1% pay rise to everyone in the NHS and award the pay rise to just over half of employees within the NHS instead. The mood of the general public seems to mirror this sentiment. With the economy starting to recover, employees are asking, isn’t it about time we are rewarded for our hard work?
The article below looks at the current drive behind the Unions’ campaign and gives employers who are planning low or zero pay rises this year some practical tips in dealing with the difficult conversations which are likely to follow any such pay announcements.

Why now?

Whilst many employers will be sitting back thinking, well that’s the public sector; this is the private sector and our employees are not expecting a pay rise, this may be short sighted. Over the past five years, unions and employees have both accepted low pay raises without much fight and employers have got used to this. However, unions are now starting to push harder, using stronger tools to back their demands, such as strikes, work to rule and refusal of overtime. The rise in these tactics in the public sector could easily spill over into the private sector. And it is not just employers with unions in place who need to be prepared. With all the press coverage, combined with employees seeing the first shoots of economic recovery within their own industries, employees are more likely to challenge pay decisions than they have in recent years. Alongside this, recruitment businesses are reporting an upturn in the number of good quality roles coming to market. Therefore, employers need to keep their talent on side in order to stop them looking elsewhere.

Why not award higher pay?

So, why are employers reluctant to award higher pay awards this year if the economy is growing? Whilst we may be starting to see signs of economic recovery, economists generally agree that the recovery is still fragile. This is demonstrated by the IMF’s recent decision to cut its 2014 global growth forecast to 3.3%, the third reduction this year. The NHS example also demonstrates this point, with Jeremy Hunt claiming that the NHS would need to lose 4,000 nursing posts this year alone if he agreed to the recommended pay rise. Many employers are still cautious and keen to avoid over promising on wages until they are more certain of what lies ahead. Borrowing is still causing issues for some businesses and the economy is not out of the woods just yet. Therefore, many employers will be planning low or zero pay rises this year for good reason. In recent years, employees in both the private and public sector have accepted and shared the pain, not wanting to “rock the boat” by demanding higher salaries and simply grateful to still be in work when so many of their acquaintances have been made redundant. However, the mood seems to be changing across the general population. There are more opportunities out there and, whilst we have not seen offers of higher salaries in the recruitment sector, employees are aware that more choice exists at the moment. Greater confidence leads to more difficult conversations where pay is concerned.

How to deal with difficult pay conversations

Any employers planning a low or zero pay rise this year would be wise to be prepared. Communication is everything. Employers who keep their employees informed of key issues going on in their business are far more likely to have an engaged workforce who trust what their employer tells them. Explain the business rationale for pay decisions and the criteria the employer needs to meet in order to afford a better pay rise next year. Discuss the ways in which employees can help drive profitability which, in turn, will lead to higher pay rises in the future.

Employers should also think about the challenges they are likely to face from disgruntled employees. Are the board receiving high pay rises? If so, explain the rationale for this. If not, explain to employees that the pain is being shared across the whole workforce, including top management. Has the company just posted record financial figures? If so, be prepared to explain why the company has decided that higher pay increases are unaffordable.
Employers with an active union will also need to lay the groundwork with union representatives, ensuring that they are engaged in pay discussions early in the process.

It is also important not to delay the decision. If employees are expecting a decision on pay at a particular time of year, work hard to ensure that they are told at the time they are expecting; don’t hold back bad news.
Prepare communications in advance of speaking to employees and ensure that any written announcements on pay decisions include brief commercial reasons for the decision made.

Listen to any concerns raised by employees and deal with those concerns (which may be a follow up action from the meeting). Be prepared that employees may react emotionally and ensure that any follow up action is taken. One of the key criticisms the Unions have laid against Jeremy Hunt is his refusal to discuss his decision with them.

It is important to be prepared. Employers who assume employees will be content with a further nil/low pay rise are more likely to get caught out with difficult conversations with their employees, or worse, lose their key talent.

Tips in brief

  • Be prepared to deal with difficult questions on pay. Think about the questions which are likely to be raised and have answers prepared.
  • Explain the commercial reasons for decisions on pay.
  • Set out the economic criteria needed for pay to increase next year and explain how employees can help the business achieve these criteria.
  • Those employers with unions should be proactive – invite union representatives to a meeting to explain the rationale behind pay decisions and be prepared to listen to/deal with concerns.

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  1. Heaven forbid that employees should want a pay rise. There are working people in this country living in poverty. So what if the boss has just had a new company car it also promotes the company image, which is good for business and my 49% pay rise over the past 3 years. We need to keep pay levels low to fulfill Thatcher’s dream of a rich country full of poor people.
    Get real when people see the bankers on million a year and then getting millions in bonuses is it any wonder that there is a call for Britain to get a pay rise.

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