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Innovating with pay strategies – thinking outside the box when under inflationary pressure





Posted by Cathryn Edmondson on 01 June 2023

Innovating with pay strategies – thinking outside the box when under inflationary pressure

Pay Fairness | Pay Progression | Pay Structure

In the absence of inflation-busting pay rises to match the cost-of-living crisis, most companies are having to get creative. Rather than focus solely on pay, we are encouraging our clients to review their core principles around reward and look broader at benefits, ways of working and culture, which I’m boiling down into four Fs: fairness, flexibility, future-proofing and friendship.


Companies often use the term ‘fair’ as a principle, but it needs to be defined. Fairness can mean different things to different people, at different times.

Fairness can often be considered as treating everybody the same and therefore “fair pay” would mean everyone being paid the same. However, in reality the definition of fairness is far more complex. Fairness be defined as paying someone fairly for their level of contribution or performance. Fairness can also be defined as paying people fairly compared to the external market, which will differ depending on the role.

Pinning fairness to market rates can be difficult because the market rate for one specific role or skillset might accelerate faster than others. Regular benchmarking can help ensure you keep in line with the market, but the credibility and reliability of the data source is key. Whichever way you choose to define fairness, the important thing is to be honest and transparent so that people cannot misunderstand it.


Increasingly, workers are looking for a degree of flexibility in how they operate. When employees can't have a pay rise, they start to scrutinise their package and deem what is useful, relevant and valuable to them. A lot of older employees who stepped away from work during the pandemic are now coming back into the workforce, so we are once again seeing a wider cross section of employees, all with different requirements from a reward and benefits package.

Running the numbers on employee demographics can be helpful because it allows employers to better understand and gauge employee engagement. For example, the uptake and attendance for webinars on debt advice may appear low across the company, but it might be high among lower-paid roles or junior employees. On the other hand, an older cohort of workers might be more likely to attend focus groups on financial options around retirement. A strong benefits package should be able to cater for both, flexing to provide options for every individual as they plot their way through their work and personal lives. Clients can worry that this means a complicated, expensive programme but by taking the time to understand their workforce it can be achieved within any company’s means.

The other important aspect of flexibility is in working practices, which inevitably leads to the conversation around hybrid and remote working. Last year’s four-day working week trial produced interesting results, with over 90% of the companies that took part extending the provision. Two-thirds of those had fewer than 25 employees, so it does remain to be seen whether the four-day week works as well for larger companies, although smaller businesses often struggle to compete with larger ones in terms of salary and benefits, so it may offer a way for those smaller businesses to differentiate in the market.

Most of the workers involved in the trial said they would not want to go back to a five-day week, so it is a brave ‘line in the sand’ decision for a CEO to make. That said, the business case was compelling: most reported productivity up, absence down and engagement higher.


Sometimes it can be difficult to convince workers to look beyond the end of the week or month, but we need to help them appreciate the bigger picture and think long-term, rather than jumping ship for a short-term, relatively small pay increase.

Learning and Development opportunities are a good way for employers to demonstrate a willingness to invest in employees, build skills sets and ultimately say ‘this is where your career can go if you stay with us’. This may also form part of broader succession planning efforts to ensure a pipeline of homegrown talent is coming through, which also mitigates the difficulty and cost of recruitment.

This far-sighted approach can also encourage longevity in your employees because in seeing their skills develop, they feel trusted and valued and are more likely to pass those same behaviours and values on to their colleagues.

Friendship and familiarity

The more we can do to foster social connections and create friendships in the workplace, the bigger the decision it becomes to leave. Hybrid working brings many benefits, but it does dilute the sense of community at work and companies are now trying to build that community spirit back up. The challenge is finding a method and a social vehicle that works for the greatest number of people, without needing to bring everyone back to the office.

Recognition schemes are a proven way of engaging workers and bringing them together. We worked with a client recently to create a peer-to-peer ‘Thank You’ scheme, activated through the HAPI App. With strong buy-in from the leadership team, staff were brought into the planning and naming of the scheme and everyone in the company - from the top to the bottom - fed into the buzz it created.


My final point is around communication and its importance. An employee will never truly grasp the full value of their total reward package unless their employer spells it out for them through regular reminders or Total Reward Statements. Strong communication aids retention by reminding employees that they have a benefit or a perk that has a value on the high street. If you offer free parking, tea and coffee or a lunch time area staff can eat in, spell it out. Like key benefits, if you don’t remind staff they are there, they might be taken for granted or go unused.

Effective communication is also the bedrock of staff retention from a cultural standpoint. Without it, the fairness and flexibility you’re striving to achieve will quickly be undone by perceptions of unfairness, particularly around pay decisions or your position against the market. With careful communication, you can reassure staff that the company remains in a good place and tell them your future plans. And only with strong, honest communication can you let your staff know that you appreciate and understand the sacrifices they might be making throughout the cost-of-living crisis, and the measures you are taking to help them through it.

More from Cathryn Edmondson

How to use your reward strategy to support good performance

Top tips to build a recognition strategy for a hybrid workforce

How to effectively communicate recognition strategies


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