Solving the pay squeeze puzzle
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The good news: Unemployment is currently at its lowest level since 1975.
The bad news: Being in work is no longer a guarantee of financial security.
Despite uncertainty surrounding Britain’s exit from the European Union, employment rates have remained steadily high. Effectively there is work available for everyone who wants a job – but too many of these fall into the ‘low pay’ category. More worryingly, a high proportion of these are remaining in low pay longer term and living below the poverty threshold.
Low-paid workers are also most vulnerable to pay squeezes. In spite of average year on year pay increases of around 2% across all industries, the rate of inflation has risen to 3%, so the real value of earnings is actually down by 0.3% over the past year. When money is tight anyway, having inflation eat away at your pay packet leaves many workers struggling to manage.
While the rising inflation rates are out of our control and equally so the ability to increase the annual pay pot, there are more fundamental and enduring ways that HR and Reward professionals can shape work, policies and practices to increase opportunities for employees to progress their pay.
- Training and development – upskilling through formal training, participation in project work, or taking on additional responsibilities all help to increase opportunities for pay progression and promotion. With the apprenticeship levy fund providing for training beyond the traditional age range, there is support available to help you fund upskilling the workforce.
- Paying fairly for performance – ensuring employees are paid fairly and rewarded for their contribution to the organisation whether through base pay or bonus.
- Pay framework – providing a pay framework creates transparency and underpins pay equity. It provides a clear pathway and link to performance and development, helping employees to understand what they need to do to progress their career and pay.
- Offering benefits which help employees’ pay packets go further – discounts as a benefit, offering a health cash plan to cover everyday costs like glasses and dentists’ appointments – helpful for your employees, and they provide good value.
- In addition, consider supporting financial wellbeing as part of a wider picture if you have many low paid employees, which offers meaningful help to people through their employment. Good quality employee loans from companies like Neyber, and debt counselling through an EAP, can make people feel that their employer supports them in good times and bad.
Getting these things right will strengthen your employee deal, which in turn leads to happier, more engaged employees and increased productivity, which can only have a positive effect on annual pay awards.
If you need help supporting your lower-paid employees, or any other aspect of pay and reward, call Innecto on 020 3457 0894.