5 trends that will shape HR in 2022

4. Consider how pay levels meet employee needs

Constrained pay levels that only just track inflation have been a common theme of our previous UK Reward Management Surveys. Even before the pandemic, we attributed constrained pay to uncertainty around Brexit. However, relatively flat wage growth is persisting – a trend that we have observed since 2008. Pay review budgets tracked gradually rising inflation at two per cent up until 2018, until the combination of economic pressure and rising living costs created an uplift to three per cent.

The most common pay award for 2021 continues to be quite evenly split between two and three per cent. 38 per cent are awarding up to two per cent, slightly less than the 46 per cent in spring 2021. However, there is a corresponding and significant ten per cent increase in the number of respondents awarding up to three per cent from 22 per cent in spring 2021 to 32 per cent in autumn 2021.

In addition to the upward pressure on pay, it is important to consider the role of out of cycle pay increases when it comes to the ‘official’ picture of pay.  Traditionally used to adjust pay for those who had been promoted, these types of pay increases are increasingly used to bridge the gap between constrained pay awards and economic pressures facing employees.

The cumulative effect of incremental increases is that it undermines the budget certainty around the pay review process. 37 per cent already anticipate awarding an additional out of cycle increase of up to one per cent in 2022. Looking to next year, 47 per cent expect that their official pay review budget will reach up to three per cent – but if 37 per cent may grant another one per cent, this will skew ‘official’ pay review figures. Employers need to assess whether their pay review process and the resultant budget predictions are robust enough to meet employee needs.

5. Look at pay and benefits holistically

77 per cent operate a bonus scheme and levels seem relatively stable into 2022. Median on target bonuses for main board directors are the same as the Spring 2021 predictions at 41-45 per cent, however maximum bonuses have risen significantly from 46-50 per cent to 71-75 per cent. This shows a return to greater business confidence in rewarding main board directors, again following the uncertainty of the pandemic. However, actual or expected median bonuses for main board directors also increasing slightly from 26-30 per cent to 31-35 per cent may be tempered by the CEO pay reporting requirements.

Equally, employers are reviewing their benefits package to ensure it delivers value for money. Beyond the traditional gym membership and bike to work schemes to promote physical and mental health, employers are also supporting employees who want to play their part in creating a greener and more sustainable environment with electric vehicle salary sacrifices. Values-led benefits are increasingly important, with employees offered carer leave, flexible working rights from day one and health cash plans for the benefit of their wider family. This can help support a more diverse workforce by giving people greater flexibility. Access to financial advice was also a key benefit that employers felt a responsibility to provide.

Each element of the reward package is increasingly being scrutinised to ensure it provides value to the employee. The benefits that respondent employers say they are actively reviewing include the bike to work scheme (for 26 per cent); private medical insurance (for 26 per cent); and the types of discounts on high street products and services. These can be highlighted in Total Reward Statements to underline the value of investment by the employer in each individual, which becomes increasingly important at times of constrained pay. The non-financial and financial benefits can be captured in one place to show the value offered beyond pay.

However, only 29 per cent have committed to offering flexible benefits. Being able to tailor rewards packages to individual preferences can ensure that employees can cherry pick the ones that they value most. Whilst this can drive employee satisfaction from the reward package, it also drives cost savings for employers who can offer a ‘menu’ of options that can appeal to different demographics across the workforce.

Get in touch

We hope that highlighting these key trends helps you in planning your own approach to your HR strategy in 2022. Many employers are still defining what new ways of working will look like for them as we plan for 2022. If you have any questions at all, please get in touch. We’re on hand to help you manage your pay and reward practices to get the most out of your people and to cultivate a strategy that delivers real value to them. Register here to contribute your views to our next UK Reward Management Survey in spring 2022.