Salaries not improving despite economic recovery

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Despite improved economic conditions, employers are still not positioning employee pay competitively at the top of the market, according to research published by the CIPD, the professional body for HR and people development.

The UK’s economy grew by 2.6 percent in 2014, the fastest increase since 2007. Despite this the CIPD’s annual Reward Management Survey found the number of companies who said they were positioning pay on the top 10 percent fell by 7 percentage points, from 35 percent in 2011 to 28 percent in 2014.

The number of employers that said they are positioning pay in the bottom 10 percent has also increased to 17 percent, from a low of 13 percent in 2012.

Manufacturing, production and private sector services are more likely to position pay in the upper part of the market than other sectors, according to the report. 37 percent of respondents in the manufacturing and production sectors, and 30 percent in private sector services said they position pay in the top 10 percent bracket.

Organisations in the voluntary, community and not-for-profit sectors on the other hand, generally pay a less competitive salary, with 84 percent positioning pay in the median, lower quartile or bottom 10 percent bracket.

Charles Cotton, performance and reward adviser at the CIPD, comments:

“With continuing economic growth and recovery of the labour market, we might have expected organisations to be aiming for competitive salaries to attract and retain employees. However, this survey shows that so far this isn’t the case. Ongoing productivity challenges are one reason meaning that many employers simply can’t afford to increase salaries significantly across-the-board. On the other hand, where employers have enjoyed access to a steady supply of labour in the market, they simply haven’t been under pressure to raise starting salaries and in turn, this has seen little movement across salary levels in general.”

“A number of external factors mean that it’s not as simple as increasing pay for most sectors. For example, an organisation’s ability to pay has overtaken market rates in importance for organisations determining pay increases. However, what’s important is that businesses ensure they’re regularly monitoring, evaluating and comparing pay, in order to respond to a tightening labour market. They also need to make sure they’re effectively communicating pay decisions to their employees, and it’s here that HR needs to step in and help write the organisational story to put earnings into context, particularly where they might not be increasing.”

 

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