Small rise in wages not enough to fuel productivity gains, says CIPD

More than half of UK workers received a pay rise in 2014 and almost two-thirds are optimistic about receiving more money in 2015, according to research from the Chartered Institute for Personnel and Development.

However, the ‘Employee attitudes to pay and pensions’ survey found that the typical pay rise has been just 2% for two years running, leaving almost half (48%) unsatisfied with their employer’s pay decision. The majority expect the same level again in 2015 yet more than three-quarters of staff haven’t been told what they need to achieve to get a pay rise and just a quarter of workers agree that their employer is giving them the training they need to increase their earnings in the future.

The CIPD is therefore warning that unless employers start thinking more strategically about pay and improving communications about pay decisions, they’ll not only fail to meet rising expectations but are also unlikely to see their increased salary bills paying off in the form of much sought after productivity gains.

Charles Cotton, Performance and Reward Adviser at the CIPD, says: “This month, many employers will be spending a lot of money on increasing their employees’ pay as part of their annual pay reviews. But to get a return on this investment our research suggests that employees are more likely to be satisfied with the outcome if the organisation takes the time to explain the reasons behind it.”

The survey found that only 51% of workers felt their organisation had explained to them the rationale behind its 2014 pay decisions with an increasing number of employees feeling that their pay rises did not reflect their performance at work.

Cotton adds: “Organisations could improve how they reward and praise individual and team achievements as well as how they manage and develop performance. The challenge for employers is to connect investments in increasing staff pay with what the business really needs. Without this direction, many will struggle to see a step-change in business performance and could face wider issues with recruitment and retention if employees think they can achieve a higher salary elsewhere.”

Other findings from the survey include:

– Half of all employee pay rises in 2014 were between 1% and 3%, with the median at 2%
– Workers aged 25-34 have been most likely (59%) to get a pay rise in 2014, followed by those aged 35-44 (56%). Those under 25 and over 55 have been slightly less likely to get a salary increase in 2014 (51% and 49% respectively).
– Those employed in the North-East of England (63%), Scotland (61%), the West Midlands (57%) and London (56%) are more likely to have had a pay increase than those in Wales (39%), Northern Ireland (41%) and the East Midlands (50%).
– Workers in the following sectors are the most likely to have seen their pay increase in 2014: manufacturing (74%), finance (66%), travel, tourism, recreational, cultural andsporting activities (65%), transport and communications (63%).
– In the public sector, a third (34%) of workers are not expecting a salary increase at all in 2015.
– Among workers eligible for a company bonus, three quarters (75%) got one in 2014 and 42% of these reported it was higher than that received in 2013. However, in 2015, only 63% think they will get a bonus with less than one in five (18%) optimistic that it will be higher than in 2014.
– Almost half of private sector workers (48%) are keen to have their pay linked to their performance whilst a majority (60%) in the public sector would prefer to see their pay linked to the cost the living.
– When it comes to performance development, more employees report that their organisation is giving them the training they need to do their job. But, this investment is focused on those at either end of the earnings spectrum rather than evenly spread among the workforce, and more employees are reporting that their employer is failing to give them the training that will allow them to do a higher-paid job in the future.
– If pay conditions do not improve in 2015, 45% of employees say they would continue to work as normal, but 15% would leave their job and 14% would continue to work but not as hard.

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