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If budgets are squeezed how do you get the most from your pay budget? Part 3 of 3





Posted by Gemma Bullivant on 13 August 2019

If budgets are squeezed how do you get the most from your pay budget? Part 3 of 3

Pay & Reward | Total reward | Reward

When budgets are squeezed, how do you get the most out of your pay budget? Sitting side by side with this question is how do you get the most out of your employees, when their pay increases are minimal or non-existent and a bonus may be out of the question? In the final part of our three-part series, we look at how the culture of your business plays a role in getting the most of your pay budget when budgets are squeezed.

An awkward conversation – even if there is a pay increase or bonus pot on the table
Talking about money can make an employer and employee feel uncomfortable. Translating the value of someone’s work into cold, hard cash is difficult, and no one likes surprises. How can this awkward conversation become a force for good within the organisation?

Start the conversation early in the year. Get ahead of any difficulties that may arise by preparing the framework for discussions early. Waiting until the final run-up to pay increase and bonus season (whenever that falls in your individual business) invites conflict, as if expectations are not aligned it can be difficult to rectify this at this point. By keeping the conversation open all year, these difficulties can be avoided. 

Find out what the employee is expecting. By building the discussion on the foundations of what an employee is expecting in terms of a pay increase or bonus, you can shape the conversation accordingly and manage these expectations if required. When budgets are squeezed, expectations can be misaligned with reality, making conversations around pay and bonuses more difficult than they need to be. By understanding the expectations your employee has, you can navigate this much more easily.

Use the conversation to let an employee know how important they are to the organisation and make it clear that you appreciate what they do. Recognition is about more than just money, and this conversation is a great opportunity to reaffirm with your employee how much they are valued by the organisation, and how important their contribution is. In a study by Reward Gateway, 60% of individuals stated that they would rather work for a company that had a culture of regularly praising or thanking them for good work than an employer who paid 10% more but did not offer thanks or praise. By giving praise where praise is due, and making this an integral part of your company culture, you will reaffirm with employees that they come to work for more than just pay.

Provide context for the conversation. By talking about how the company is performing compared to competitors, economic factors that may be at play, and what the market pays for their skill set in the same job, you can demonstrate the rationale on which decisions regarding pay have been based, and provide a more detailed context for the conversation. Employees will be more understanding of any decisions made if it is explained to them effectively.

An alternative approach
But pay isn’t the only reason people go to work. Experience shows that employees place great emphasis on intangible rewards when deciding where to work and how committed they are to the job. A Total Reward policy allows an organisation to focus in on non-financial rewards, such as:

  • Access to professional & career development, personal growth, and mentoring
  • A challenging role
  • Freedom and autonomy
  • Effective employee recognition
  • Preferred office space & equipment
  • Employee empowerment to raise matters of concern
  • Involvement in decision-making about how work is carried out
  • Flexible working, working from home, or advanced notice of shifts or changes to work schedule to allow for planning
  • Increased annual leave allowance to acknowledge long service, or a day off on their birthday


A Total Reward Package strategy
A Total Reward Package has the potential to enhance the employer’s reputation as an employer of choice, through its capacity to put a value on the non-financial benefits of working for the organisation.

The topic of Employee Recognition is far-reaching but sits at the heart of many of the elements listed above. It is one of the most important aspects of an organisation’s culture, since an organisation is only as good as its employees. When money is in short supply, recognition of what is good or outstanding in employee performance, attitude or teamwork becomes more important than ever.

Employee recognition leads to contented and motivated employees and is a cultural stand any employer can take and which does not require deep pockets.

Making a Total Reward Package successful
For a Total Reward package to be successful, an organisation must get the communication right about the value of the reward package, and the strategy behind it. If employees don’t understand what it is, or why it has been implemented, they won’t engage with it and it will cease to be seen as beneficial.

Equally, the Total Reward Package must be defined according to the needs and wants of its staff, or, again, engagement will be non-existent, rendering it pointless. An organisation must also resist the temptation to move the reward mix from pay to lower cost benefits and non-financial rewards. By avoiding these potential pitfalls, you are more likely to make employees see the long-term value the Total Reward Package provides.

When the pay pot is limited, employers must become more creative in order to keep staff motivated and happy. It is therefore imperative that employers understand the key drivers behind why an employee comes to work, other than for their pay packet, and builds a culture and reward strategy according to this. Work is about more than pay, with many other social, emotional and mental health benefits coming into play. By providing a total reward package that helps employees thrive, employees can be kept happy, healthy and motivated even when pay budgets are squeezed.

If you missed the first two parts of our three-part series, be sure to catch up on part one, which looks at creative bonus schemes, and part two, which looks at flexible benefits. If you would like to find out more about total reward packages, or how you can keep staff engaged when pay budgets are tight, please email me at or call us on 020 3457 0894.

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