Informing the 2014 pay review

What are people paying for their forthcoming pay awards? This is the most common question we get asked by our customers at this time of year. It can be a difficult one to answer because this question is often asked at the start of most people's pay review processes, when few companies have set their budgets. However, whilst this is often the case in September, now we are closer to the end of the year, most January budgets have been agreed. Furthermore, we have held our Autumn round of HR Group meetings.

Looking back

Firstly, to give next year's pay awards some context, it is useful to look at this year. Across all sectors, most 2013 reviews have been between two and three per cent (with a median of around 2.5 per cent). In addition, one in ten organisations had a pay freeze. We have found some marginal sector-specific variations such as Airlines and Telecoms broadly paying half a per cent higher than this, whilst Construction paid half a per cent lower.

There are further variations of up to two per cent apparent within sectors, between different organisations. These tend to be influenced by individual organisational circumstances such as business performance, the mix of products / services offered, and/or the types of projects worked on.

Looking ahead

Onto 2014 and Paydata’s Autumn UK Reward Management Survey gives an excellent indication of the anticipated pay awards. Although almost 40 per cent of people indicate that it is too early to say, there is a clear trend towards most budgets being set at between two and three per cent, in line with this year. These figures have been re-enforced by our customer discussions and show a remarkable consistency with previous years. Despite this, there does appear to be a small movement for the majority of organisations, away from ‘Up to two per cent’, towards ‘Up to three per cent’. It is also interesting to note that no one is currently suggesting  that they will freeze pay this year.

Sector variations look likely to continue into the New Year with Construction struggling and Housebuilding continuing its rapid recovery. It is interesting to note that the sectors with the highest pay pressures expect to see an increase in out-of-cycle pay increases and have indicated they will set aside additional funds to accommodate this. Even in sectors that are struggling, pay pressures are prevalent for specialist industry roles. This highlights an underlying nervousness within our customers that when the economy does pick up, a combination of skills shortages and a more competitive labour market may result in an increase in labour turnover. This is something we aim to track very carefully in the coming year.

If you require any advice on pay awards please feel free to contact me on +44 (0)1733 391 377