Who gets the money?

The Office for National Statistics (ONS) has today released its provisional results for the 2013 annual survey of Hours and Earnings.

When it comes to pay review time, we are often asked what other clients are doing in relation to pay increases, bonuses and commission. We can only look at a small snap shot, but here the ONS provides us with a much larger, quantified picture.

The actual report is over 40 pages long, but the key findings for full time employees are as follows:

  • Median Gross weekly earnings for full time employees have increased 22% to £517.
  • Although women are paid less, their salaries are increasing at a faster rate then men.
  • The pay gap currently indicates that men are paid 10% more than women and this gap has widened by 0.5% in the last year.
  • The median gross earnings were £27,000, up 2.1% on the previous year
  • 10% of employees earned less than £7.28 per hour
  • 10% of employees earned more than £27.02 per hour
  • Significant regional differences remain with employees in London earning the most and those in Northern Ireland earning the least

So the information is great, but what can you do with it. As with all data, it enables business owners to take informed decisions.

As the economy starts to pick up, top performers will look for new challenges, people who have been nervous to move during bad times start to look around. At the same time businesses with growing confidence are taking on new staff and filling vacancies which were put on hold waiting for the upturn. This presents employers with a problem, the good staff will be able to find other jobs, better paid or with better prospects. They move on and the poor performing staff are left as they are not able to secure new positions. Employers must be able to compete to retain their high performing staff. Money is often a key motivator (but not the only one), so make sure you are paying your staff what they are worth so they don’t go looking for pay increases elsewhere.

Look at how you can incentivise staff with bonus and commission opportunities. Care should be taken when designing these schemes so that they are motivating for staff and attractive enough to act as a retention tool, but they are affordable for the business. Many organisations will increase performance bonuses rather than base pay. Once base pay has been increased it is a permanent liability for the business, a bonus however is an affordable variable pay element that is only paid when the company can afford to do so.

Where a company has a pre determined pot of money for the salary bill, the business managers have to take some tough decisions. Do you split the money equally between everyone? Do you pay a uniform cost of living percentage increase to everyone – so those with higher salaries receive more, further widening the gap between the top and bottom earners, or do you pay for performance against market data and bring people in line with their job market average, providing their performance is satisfactory. The pot will only stretch so far and many organisations appear to incentivise senior staff to ensure they stay within the business as their skills and experience are often more valuable.

Whatever pay and bonus strategy a business adopts, it is essential that there is no discrimination either direct or in direct. Age and gender tend to be the main risk factors although any of the protected features such as race, sexual orientation etc must not feature in any reward strategy.

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