With 2012 set to be marked by constrained and frozen pay, employers must find more effective ways to communicate the rationale behind their decisions to staff in order to keep them motivated, an HR body has warned.
According to a survey among 3,056 working adults across all sectors undertaken by the Chartered Institute of Personnel and Development, last year saw a huge 48% of employees’ wages being frozen, the highest rate since the start of the credit crunch in 2008 when only half that number received no pay increase.
Some 5% of personnel also had their pay cut during 2011, while the proportion receiving a pay rise fell from 67% three years ago to 45%. Just over half of workers in the private sector obtained a salary increase compared with 45% in the third sector and only 24% in the public sector. The median rise was 2.5%.
But the ‘Employee Attitudes to Pay’ report also revealed that, even among those workers that failed to receive a pay rise, satisfaction levels had dropped year-on-year from a net of +62 in 2009 to +56 by 2011 – although staff felt happier if their employer had taken the time to explain the rationale behind their payment policy.
Workers who received a pay cut were most likely to have had the decision explained (76%), followed by those obtaining a wage rise (62%). Only 57% of those undergoing a pay freeze were given an explanation, however.
Feeling valued
The most common reasons for any given pay decision was the state of the economy (45%), how much money the organisation had to spend (38%) and the individual’s performance (15%).
Charles Cotton, the CIPD’s rewards advisor, said the findings suggested that employers attached more importance to communicating pay freezes and cuts than they did pay rises.
“However, with only 19% of employees feeling that their pay rise reflects their performance, there is clearly a need for improved communication of positive news, so that employees feel valued and understand what’s important to their organisation. Only then might employees remain engaged with their work and motivated to perform well,” he added.
When personnel were asked whether they felt valued by their employer, the net satisfaction score was a mere +4, down from +33 in 2008. Pride in working for the organisation had dropped to +32 from +50, motivation to perform well to +24 from +46 and a feeling that their employer communicated well had plummeted to -6 from +25.
As a result, Cotton recommended that organisations review how they communicated the economic realities that the business faced and what needed to happen for personnel to obtain a pay increase.
While managers faced a tough challenge to maintain employee commitment and motivation, the penalty of failing to do so would be “falling national productivity and a vicious circle of continued declines in pay and jobs as we lose out to our international competitors”, he added.
