UK employers are becoming more transparent in how they set pay levels and calculate pay rises as part of a wider trend towards increased business accountability, according to an HR body.
The latest Reward Management Survey from the Chartered Institute of Personnel and Development (CIPD) revealed that just over two thirds of the 700 employers questioned were clear about how they set pay levels.
Some 71% indicated they were transparent about how pay rises were calculated and three out of five were open about the size of wage increases awarded as a result of such processes. The figures compared with the previous Reward Management survey undertaken in 2015, which found that only half of respondents were in favour of pay transparency unless they it was mandated by legislation.
Charles Cotton, the CIPD’s senior reward and performance adviser, said: “While we’re still some way off from seeing full disclosure on pay and reward, there are strong indications that employers are increasingly willing to be open about the processes behind their pay decisions, and in some instances, the outcome of these.”
This trend was “part of a much wider shift in business accountability which we’re seeing through gender pay gap reporting and calls for greater transparency on executive pay”, he added. The Financial Reporting Council’s latest proposals for a revised UK Corporate Governance Code are also expected to add further momentum to the trend.
As for performance management, the survey found that the majority of employers were still taking a traditional approach, with 91% choosing to assess performance against individual goals.
Just over half of this majority then used this kind of assessment to inform salaries and other reward decisions. By way of contrast, a mere 27% adopted 360-degree appraisals and only 24% used peer assessments.
But some organisations are starting to become more creative in using rewards to help boost their performance. In the case of group reward schemes, there has been dramatic growth in the use of gainsharing – where employees receive bonuses linked to productivity improvements or cuts in production costs – with 41% of employers taking this tack in 2017 compared to 20% in 2015.
Moreover, as competition for talent in certain sectors and locations has become more intense, some 70% of employers have opted to use market rates as the key factor in determining wage levels.
On the other hand, market-based pay is used much less frequently to inform subsequent pay rises once an individual is hired, with decisions more likely to be based on performance, competencies and skills. This situation has the danger of leading to “employee relations issues in the future if new staff are being paid more than existing staff for doing similar jobs”, Cotton warned.
Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.
UK employers are becoming more transparent in how they set pay levels and calculate pay rises as part of a wider trend towards increased business accountability, according to an HR body.
The latest Reward Management Survey from the Chartered Institute of Personnel and Development (CIPD) revealed that just over two thirds of the 700 employers questioned were clear about how they set pay levels.
Some 71% indicated they were transparent about how pay rises were calculated and three out of five were open about the size of wage increases awarded as a result of such processes. The figures compared with the previous Reward Management survey undertaken in 2015, which found that only half of respondents were in favour of pay transparency unless they it was mandated by legislation.
Charles Cotton, the CIPD’s senior reward and performance adviser, said: “While we’re still some way off from seeing full disclosure on pay and reward, there are strong indications that employers are increasingly willing to be open about the processes behind their pay decisions, and in some instances, the outcome of these.”
This trend was “part of a much wider shift in business accountability which we’re seeing through gender pay gap reporting and calls for greater transparency on executive pay”, he added. The Financial Reporting Council’s latest proposals for a revised UK Corporate Governance Code are also expected to add further momentum to the trend.
As for performance management, the survey found that the majority of employers were still taking a traditional approach, with 91% choosing to assess performance against individual goals.
Just over half of this majority then used this kind of assessment to inform salaries and other reward decisions. By way of contrast, a mere 27% adopted 360-degree appraisals and only 24% used peer assessments.
But some organisations are starting to become more creative in using rewards to help boost their performance. In the case of group reward schemes, there has been dramatic growth in the use of gainsharing – where employees receive bonuses linked to productivity improvements or cuts in production costs – with 41% of employers taking this tack in 2017 compared to 20% in 2015.
Moreover, as competition for talent in certain sectors and locations has become more intense, some 70% of employers have opted to use market rates as the key factor in determining wage levels.
On the other hand, market-based pay is used much less frequently to inform subsequent pay rises once an individual is hired, with decisions more likely to be based on performance, competencies and skills. This situation has the danger of leading to “employee relations issues in the future if new staff are being paid more than existing staff for doing similar jobs”, Cotton warned.
Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.
