PAYnotes on the struggles of pay review decision-making

Pay review decision-making

Recent experience of project managing our end of a number of our PAYreview software solution implementations suggests that for some organisations the decision-making process at pay review time is somehow strangely poised on a knife edge. Frequently, decisions are left to the last possible moment…or later. The resultant strain on the customer’s organisation, the HR team and incidentally on our own resources too, is only too predictable.

Now just in case I’ve not made myself clear, I am not talking about the decision reviewing managers make in deciding how much a particular individual is going to get relative to someone else. Whilst there can be a certain amount of toing and froing on such matters, that generally happens when it’s supposed to.

No, what puzzles me most is the decision-making process, usually undertaken between HR and the upper echelons of organisations, to decide how much to spend and how to allocate it. It amazes me that you can, for example, go through the whole process only to find that, two days before payroll closes, the executive team have changed their mind and decided to implement a one per cent reduction in half the business areas and give a lump sum payment to the rest. 

Don’t get me wrong, decisions at this level can be both difficult and expensive. Allocating scarce funds to the best effect is not a simple task. Even a small movement of half a per cent can add millions to the operating costs. Reaching a settlement in what are often complex internal negotiations between business areas and functions can be taxing. It’s not really that surprising that they are difficult decisions to reach. But I can’t help feeling that a similarly expensive capital investment decision would not be treated with quite the same just-in-time approach.

And yet, frequently it appears the decisions that need to be made, usually to meet a pre-determined timetable that has been known 12 months in advance, are left to the 59th minute of the 11th hour. There is then an almighty panic in the HR and reward teams as they struggle to understand and interpret the end result, in order to make the pay review happen. I have been there myself and I know it’s not a comfortable position to be in.

I have also experienced those tense situations where you and a trade union are both taking the other to the edge, in order to either eek out or protect against an extra 0.25 per cent. But having said that, in all the cases I’ve come up against recently there wasn’t a union involved; it was the management process itself that couldn’t meet the demands of the timetable. 

So what causes a normally well run business to perform so poorly in this area?  Is the issue just too difficult to be able to legislate for?  Is it because the decision-makers are too far removed from the adverse consequences for employees reliant on their increase to make ends meet?  Maybe it’s because they think HR do a better job when they’re under severe time pressures. Or is it something else?

I am not trying to be controversial or argumentative and I also don’t want to give the impression that all organisations have difficulties in this area – they don’t. Indeed some are reassuringly able to stick to their deadlines year after year. Their plans and their stress levels remain well under control throughout.

Our software is about making the pay review process much easier to manage - our customers who use PAYreview tell us it does just that. Therefore, I’d like to understand why the decision-making process goes awry and what could be done to prevent that happening. Ultimately I’d like to know how, if at all, we can help our customers avoid the problem in future. 

By Peter Brown 

The National Living Wage…a step not far enough?

As George Osborne delivered his seventh budget as chancellor, it would be understandable if you were left a little bewildered by the introduction of a new national living wage.

The national living wage will see all workers aged over 25, earn at least £7.20 an hour from April 2016, reaching £9 per hour by 2020 - giving an estimated 2.5 million people an average £5,000 rise over five years.

This can only be seen as a positive step in the right direction for all those who fall below the current living wage level, as defined by the Living Wage Foundation. However, this is where the confusion begins. With the introduction of the new 'National living wage', pitched alongside the established 'National minimum wage', the 'Living wage' and the 'London living wage', it all becomes a bit bewildering. 

The terminology in itself is confusing...the new national living wage is 65p an hour lower than the current living wage rate which is now £7.85. Given that the current living wage is calculated according to the basic cost of living in the UK, can the new national living wage really be all that it says it is? David Cameron has previously described the current living wage "an idea whose time has come". Yesterday's announcement calls into the question the government’s definition of a living wage.

I can't help but think that the new national living wage adds a level of complexity that is not needed and not entirely helpful or transparent. Would it not have been easier to enforce the living wage? As it stands, I see it as a half-way house between achieving a higher national minimum wage and a real living wage.

By Naomi Pearson 

Paydata office move reminder

A little reminder that we are moving offices today (10 July 2015). We won’t be operating during the move; normal service will resume on Monday, 13 July. 

If you have an urgent query, our mainline office number (+44(0)1733 391377) will be diverted to a mobile phone for the day. Please be aware however that we will not be able to provide a full service, as we will not have access to any computer systems. 

A new addition

We have an addition to the Paydata family!  Our operations manager, Steve, became the proud father to his first child last week, a little boy named Samuel. Congratulations to Steve and his family from everyone here at Paydata.