No more annual pay rises?

A new CIPD study reveals that employers are increasingly shying away from across-the-board pay rises.

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Last Updated: 06 Nov 2012

The CIPD’s Annual Reward Management Survey found that nearly half of the UK’s employers no longer provide an annual rise for all their staff – even if it’s just to keep pace with inflation. Instead the trend is to give managers a fixed budget to distribute as they fit – a decision that’s typically based on individual and team performance, plus the general market rate (particularly common in manufacturing and service firms, apparently).

This obviously leaves managers facing some tricky conversations - since in 82% of private sector companies, they’re the ones who have to deliver the news. After all, no raise effectively amounts to a pay cut, given that the cost of living tends to go up every year. And according to the CIPD, only one third of employers are confident that they’re up to it (which rather begs the question: why not give them more training?).

And it’s not just the salary part of reward packages that’s feeling the squeeze. Within the manufacturing and production sector, half of all employers have closed their final salary pension scheme to new entrants. That means employees have to sign up for defined contribution schemes instead, which will be worth less in the long run.

Three-fifths of companies have also reviewed reward policies to reflect their environmental strategies – apparently the greener you are, the better your company’s reputation, so the better you get paid. This could be a far-sighted way to inspire employees with your green vision – or it could be a way to pay lower bonuses. We’re not entirely sure.

Still, there’s no doubt that organisations expend a lot of valuable time and energy on pay negotiations. So it’s perhaps not surprising that Gordon Brown wants to set public sector pay for three years at a time (which has the added benefit of keeping a lid on inflation) - even if it does mean that he and his fellow MPs have to settle for a lower raise too.

But the most terrifying statistic in the CIPD survey, in our opinion, was that 1% of employers now use DVD, blogs or podcasts to deliver pay messages. While we’re all for greater use of technology in the workplace, we doubt that employees will retain much love for their company if they have to discover the details of a pay cut via their iPods...

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