The traditional annual pay rise is out of favour with almost half of all businesses, no longer awarding employees an across the board pay rise each year or cost of living adjustment.
This is according to the Chartered Institute of Personnel and Development’s (CIPD) annual reward management survey. Manufacturing, production and private sector service firms are the least likely to provide such a pay rise.
The move away from the traditional pay rise comes on the back of Gordon Brown’s recent announcement to abandon annual pay negotiations for public sector workers in favour of a three yearly settlement.
The current trend, says the CIPD, is to allocate pay budgets to departmental heads to distribute among staff based on individual and or collective contribution, and movements in market rates and inflation, rather than as an across the board rise.
According to the survey, problems can occur when the changes aren’t communicated effectively. Only one third of employers are confident in their line mangers ability to deliver the appropriate pay messages. Eighty-two per cent of private sector organisations use meetings with line managers to communicate pay messages with 88 per cent of public sector organisations communicating pay messages through HR.
Charles Cotton, CIPD’s employment conditions and reward adviser, said: “Changes to pay and reward packages can often leave employees confused, demotivated and in the dark about what they need to do to achieve reward and recognition. Line managers can play a key role in delivering messages around pay, but they need to be coached and developed on how to communicate messages around pay increases and benefits more effectively.”
Pension arrangements are also changing. Only one fifth of organisations are keeping final salary pensions open to all employees. Specifically within the manufacturing and production sector, 50 per cent of firms have closed their pension schemes to new entrants, expected to increase to 68 per cent this year. The survey detects an increasing number of employers putting more money into defined contribution pension arrangements, reflecting a concern that going forward employees may not receive a decent pension.
Green issues are also moving into the reward agenda with 62 per cent having reviewed their reward policies to ensure it supports environmental strategy. The most significant driver given for carrying out these reviews is to enhance and protect their organisation’s reputation.
Cash based bonuses or incentive plans continue to be popular with 70 per cent of organisations using them. Broken down by sector 86 per cent of organisations in the manufacturing and production sector, 89 per cent in private sector services and 30 per cent of voluntary and public sector services provide cash based bonuses.
The findings will be discussed on 6 February 2008, at the CIPD’s annual reward conference in London Olympia.
