PAYnotes on 2015 pay reviews: approaches and expectations

Differing approaches to 2015 pay reviews 

Talking to our customers I get very different views about what they plan to do in this year’s pay round. 

Recently I’ve been told:

  • We plan to pay an across the board increase of three per cent;
  • This year’s pay round will be very tight for us, we cannot afford to spend very much;
  • This year’s pay round will be well-funded, we need to address market pressure on core skills; or
  • We think our people are well paid and we will be looking to differentiate our pay so we’ll start to address.

So, diverse views but with one key thing in common. While keeping an eye on the market these businesses are primarily focussed on doing what is right for them and are less concerned with “following the herd”. 

They regularly access salary benchmarking data in order to understand their competitive position and they have well-defined reward strategies that set out how they are positioning their pay. This approach gives them the confidence to make the right decisions for the long-term health of their respective businesses.

As the last recession started to bite we saw pay freezes, deferred pay reviews and mostly sub-inflation pay increases. It was predicted that the annual cost of living increase cycle had been broken for good. Perhaps it is too early to say whether this proves to be true in the long-term but it is certainly right in that there is evidence that employers are resisting a return to historic settlement arrangements.

By Paul Hajduk

Expectations for 2015 pay reviews

As Paul has noted above, there is a diverse range of approaches to reviewing pay in 2015. The autumn 2014 edition of the Paydata UK Reward Management Survey tended to confirm that. 

When asked about the format of this year’s review, about 70 per cent of organisations indicated that they will have some form of individually determined pay actions. Of the sample, more than a third indicated that they would only have individually determined increases. About a quarter expect to adopt a rather more mixed approach where there would be a small across-the-board increase supplemented by additional “merit” spend. Less than a quarter only expected an across the board increase.

In common with the views we’ve picked up over the last few years, almost two thirds of organisations expect to be targeting high performing people when they are allocating pay increases. This suggests they want to hold on to their talent. Furthermore, almost the same proportion expect their reviews to be driven by external relativities in an effort to both retain and attract the skills they’ll need as the recovery continues.

The indications are that when pay budgets are small it’s important to get value for money. The signs are that organisations are very conscious of spending their pay review budgets wisely.

By Peter Brown