So we read again that real pay increases have flatlined. This means that basically the same as it has for the last decade, no increase in real take home spending power for the average employee. The attached article confirms that median pay awards are still rooted at 2.5%, the same rate as the consumer price index.

What does that mean for the average employee in the UK?

Well . As prices of goods and services are increasing at the same rate as salaries, it means that despite a nominal increase in salary, there is no extra take home pay for employees. This leaves a major headache for UK businesses, as with uncertainty on the horizon in the form of Brexit, many can not afford to increase costs but equally, key skills in the job market are in short supply. So what can employers do to deal with these conflicting priorities?

1. Be realistic when offering pay at recruitment

Sometimes it’s tempting to pay as little as you can to get a new employee but this might not always be the best strategy if you want an employee for the long term. If your company is one that typically tries to recruit as cheaply as possible on the basis that the employee will get increases as they demonstrate their worth, can this realistically be done on a 2.5% pot? It may be best to offer more at hire time than make promises that you later find you can’t deliver. It’s cheaper to retain a good person than go out and find another! See our post for more details on the cost of bad recruitment.

2. Think about total compensation

If you can’t offer more on base salary, what else can be done? Could you provide a better benefits package, offer more flexible working or maybe offer performance-based incentives? Think broader than just salary, especially if this will help to motivate and engage employees to deliver profitable work.

3. Recognise good performance

A kind word goes a long way. You don’t have to offer huge amounts of cash to motivate employees who’ve delivered great work. Instant and genuine recognition is proven to be very effective.

4. Develop your teams

Employees will often be happy to defer salary increases if they feel they are being developed. If you are an apprentice levy payer, you can use the money you are already paying to put your employee’s through quality training. If you aren’t, even better! 90% of the cost of training is payable by the Government so it is seriously worth considering.

So, real pay may be flatlining, but there are weapons left in your armoury.  If you want to discuss how to use them effectively, contact us today. #humanresources #hr #peoplematter

Pay awards at 2.5% for third consecutive quarter

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