In between the blanket coverage of Lady T’s funeral yesterday, I did hear one snippet of relevance to both this blog and our audience. The latest figures from the Office for National Statistics (ONS) show the lowest increase in average weekly wages since their records began in 2001.
On average, wages increased by just 1% excluding bonus payments, or 0.8% including bonus. For full details of their findings please see the following link:
This is relevant, as some our followers and/or delegates at our major London events will recall that I was making a case for benefits over extremely low wage increases at our October Healthcare event only last year (and, coincidentally, I was delivering a similar speech only last night at a CIPD event in Kent).
Put simply, I am suggesting that extremely low levels of pay awards can be more damaging than productive. A 1% pay rise, once tax and national insurance have been deducted, may only deliver a few pounds extra to an average wage employee at the end of the month. Such an increase may actually be greeted with derision rather than gratitude. This, in turn, can seriously impact on employee engagement and productivity.
And not only does the employee end up with significantly less than 1%, the employer also has to fund more than this figure owing to the impact of employer’s national insurance.
So there are potentially times when a small pay rise can do more harm than good. And I was suggesting that in some cases (by no means all) offering some additional benefits to employees rather than nominal pay increases may be better received and more cost effective for all parties.
I must admit that I was gratified by the audience response in October. I posed the following question to our audience at that time:
“Would you consider providing extra employee benefits instead of a very small pay rise for employees?”
The responses were as follows:
- Yes 45.01%
- No 13.00%
- In some circumstances 29%
- Not sure 13%
(total responses 169)
And with yesterday’s announcement from the ONS, perhaps now is the time for some employers to explore such an approach?
It should however be remembered that the ONS figures are based on the last 12 months, rather than predicting future awards.
Delegates at our February event were somewhat more positive about the employment outlook for 2013, with 23% predicting average pay increases of more than 2%, and 43% predicting increases of up to 2%.
As ever, different industries and employers will face different challenges, but it’s always useful to be reminded that sometimes a less direct approach to pay and reward may be more beneficial for all parties.
Best regards
Steve
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