Spring pay reviews marginally up on 2013

Pay reviews over the past few years have been remarkably consistent overall. Indeed, it feels like a long time since I quoted anything other than the range two to three per cent at our twice-yearly HR Group meetings.

This year’s spring pay round (January and April pay reviews) across all industries appears very similar, with the lower quartile review being two per cent and the upper quartile being, you guessed it, three per cent. However, this range hides a small but important trend. Over the past few years, the median and mean figures have been between 2.2 and 2.5 per cent and other providers are certainly quoting these figures now. However, this is driven by their sample populations that include the public sector, with their more restricted budgets.

Our up-to-date market database includes a broad cross-section of private sector industries. Our spring figures indicate a median figure of 2.75 per cent and a mean of 2.71 per cent. This is marginally up on last year’s figures of around 2.5 per cent and provides further evidence that the labour market is slowly starting to pick up. This is further evidenced by the most common spring increase being three per cent (up from 2.5 per cent last year).

These trends appear to be consistent between the January and April review periods. April appears to be only marginally lower than January and that is largely due to the industry mix within our database.

Industry variations

Most sectors, such as Aviation, Construction and Call Centres, are broadly in line with the overall pay review figures.  However, there are still some interesting, but small variations. For example, the Care Sector is currently paying half a percentage point below the overall average, within the range 1.5 to 2.5 per cent. At the other end of the scale, House building appears to have largely paid three per cent this spring. Associations and Institutes show a wide range of reviews between 1.5 and 3.0 per cent, where organisational performance (driven by membership size and structure) has a significant influence on pay budgets.

Across-the-board or differentiated approach

In the early phase of the recession, we saw a slight upturn in differentiated pay reviews, where employers varied the pay increase for different individuals or groups of individuals (e.g. by grade). This was largely driven by the need to make full use of a restricted pay budget. However, the differentiated approach is more complex to administer and requires greater resource – although specialist pay review software can help greatly with reducing the time and resources taken. Across-the-board increases have historically been quicker and easier to apply, although as I say, the trend has been away from this over the past five years. Analysing the spring awards it is interesting to note that the split between these two approaches is around 50 / 50, where I would have expected this to be more in favour of differentiated reviews.

It will be interesting to see if this even split between the two approaches changes in the next five years as the economy slowly recovers and employers find it tougher to recruit and retain the calibre of skills they require to meet their business needs. Certainly, a number of employers indicate that whilst they are applying a single increase to the majority of their employees, they still offer a larger increase to specific roles where they know the market is more competitive.

If you require an update on the latest pay awards, or need to benchmark any of your roles, please feel free to contact me on +44 (0)1733 391 377.