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This year’s Annual Reward Management survey from the Chartered Institute of Personnel and Development (CIPD) reveals that manufacturing, production and private sector service firms are the least likely to provide such a pay rise.

The current trend is to allocate pay budgets to departmental heads to distribute among staff based on individual and or collective contribution, and movements in market rates and inflation, rather than as an across the board rise. 

Under these circumstances there is a greater need to communicate pay messages clearly. CIPD research, however, shows only one third of employers are confident in their line manager’s ability to deliver the appropriate pay messages.

Confused, demotivated and in the dark 

Charles Cotton, CIPD’s employment conditions and reward adviser, said that the decline in the yearly traditional pay rise seems to be spreading throughout employment sectors.

As an example he gives Gordon Brown’s announcement of new plans to abandon annual pay negotiations in favour of a three yearly settlement for public sector workers.

“Changes to pay and reward packages can often leave employees confused, demotivated and in the dark about what they need to do to achieve reward and recognition,” Cotton says.

He believes that line managers can play a key role in delivering messages around pay, but warns that they need to be coached and developed on how to communicate messages around pay increases and benefits more effectively.

Defined contribution pensions 

It is not only the traditional across-the-board pay rise that is on the wane in the private sector, but also the final salary pension scheme, with only one fifth of organisations keeping them open to all employees.

Specifically within the manufacturing and production sector, 50 per cent of firms have closed their pension schemes to new entrants, expected to increase to 68 per cent this year.

The survey detects an increasing number of employers putting more money into defined contribution pension arrangements, reflecting a concern that going forward employees may not receive a decent pension.

The environment has also become a major concern to organisations with over three fifths (62 per cent) of employers having reviewed reward policies to ensure it supports environmental strategy. The most significant driver given for carrying out these reviews is to enhance and protect their organisation’s reputation.

Powerful message 

Cotton adds that the shift in pay practices from those that solely reward financial achievements to those that recognise environmental goals suggests an increasing concern with employer branding.

He says that attempts to align the environmental practices with the employer and product brands can make it easier to attract, retain and motivate talent as well as retain and attract new customers and clients in an increasingly competitive market.

“How you reward and recognise employees sends a powerful message to employees at all grades about what your organisation regards as important. If you claim a green philosophy then this should be reflected in your reward principles, strategy, policies and practices,” Cotton concludes.

The survey found that 70 per cent of organisations use cash based bonuses or incentive plans. Broken down by sector 86 per cent of organisations in the manufacturing and production sector, 89 per cent in private sector services and 30 per cent of voluntary and public sector services provide cash based bonuses.

Only 40 per cent of employers plan to amend their current bonus scheme or introduce new schemes.

Over one third of employers operate both recognition and non-cash incentive schemes. Private sector and larger employers are much more likely to operate such plans.

Seventy-five per cent of employers use a combination of factors such as individual performance, market rates and team performance to determine an employee’s pay progression.

Just one per cent of employers use video/DVD, blogs or podcasts to communicate pay messages. Eighty-two per cent of private sector organisations use meetings with line managers to do so, while 88 per cent of them communicate pay messages through HR.

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Related links

• Chartered Institute of Personnel and Development