3 tips for staying competitive in the pay race
Employers have faced increasing pressures during the first half of the year from rising costs, double digit inflation and a tightening labour market. Many organisations have taken action by increasing salaries or providing additional one-off payments to support staff.
Yet two challenges remain for employers in this competitive labour market: finding the best candidates for vacancies and retaining existing talent.
In the latest CIPD Labour Market Outlook, seven in 10 employers expect to recruit in the next three months, with fewer planning to make redundancies than before the covid-19 pandemic as employers focus on keeping existing staff. Both rely on the same core pillar of the wider employee value proposition: an attractive and competitive pay package.
To achieve this, employers will need to ensure pay decisions to attract and retain staff are supported by accurate pay benchmarking data. While it may seem that establishing an accurate market rate is difficult during the current economic crisis, here are some top tips for employers to harness benchmarking data.
1. Check your sources
In periods of rapid pay change, employers need to review their pay benchmarking sources to ensure they are still relevant. This includes asking questions such as:
• Do similar organisations participate in this survey?
• Does this survey cover the industries we now operate in?
• Can we match our technical or specialist roles to relevant comparators?
• What is the data depth of the survey, particularly in our hard to recruit areas?
While it may be tempting to use publicly available data, it often only provides broad ranges based on job titles. There is a wide range of data submission survey providers and more specialist club surveys available underpinned by a robust framework.
Much like the annual search for a new insurance product or a better energy deal, make sure you are looking across the market where you can find the most relevant benchmarking data.
2. It’s not all about the base
In response to recruitment and retention challenges, many organisations have moved beyond just raising salaries. Lloyds, Rolls Royce, Serco and Nationwide have all awarded additional cash payments to their workforce due to the cost of living pressures in 2022.
Therefore, focusing purely on base salary for benchmarking salaries will fail to capture the overall pay comparison in a time of rapid change. Employers will need to take a more forensic analysis of the total pay outlook for a true comparison by asking:
• What is the weighting between base salary and other additional amounts?
• With more firms moving to hybrid working, are location allowances provided?
• What proportion of the workforce is eligible for a bonus and how much is deferred?
• What trends are occurring in allowances, eg overtime or skills supplements, which suggest a changing approach to company policies?
In some cases, a review of the overall benefits package is needed. A recent survey by Willis Towers Watson showed that more companies were planning to emphasise the non-financial elements than raise salaries in the face of labour market challenges.
It is, therefore, crucial to be aware of the approach taken by similar organisations to ensure that the total package remains attractive.
3. Following the numbers
Carrying out a robust and accurate benchmarking exercise is the start, not the end. A one-off exercise will provide you with a snapshot, but it requires ongoing maintenance by employers to benefit from the true value of benchmarking.
Most salary surveys require annual submission of data to ensure that the results are updated. However, as most salary surveys focus on the previous year, employers wishing to keep in line with the current market can take further steps to adjust figures including:
• Inflationary increase to reflect real term salaries
• Sector or industry based pay rise data
• Regional changes or shifts in pay
•Upcoming uplifts in national rates, such as living wage
It is clear pay rises cannot match the soaring inflationary rates which have reached a 40 year high. Moving beyond the headline figure and focusing on the core inflation rate or using Bank of England forecasts can help employers make informed decisions on updating benchmarking data.
In partnership with Innecto Reward Consulting
We have more than 20 years' experience in getting employers' pay and reward working harder for them.