At Paydata we have tracked steady levels of pay increases since the recession, just keeping pace with inflation and rising to the highest average of three per cent pay increases last year. However, money in itself is not a motivator to guarantee happiness at work. Reward encompasses everything an employee derives from work and goes beyond purely the question of pay, covering extrinsic and intrinsic factors. We outline the role of competitive pay as one of a range of tools that employers need to consider when identifying how best to motivate and retain current talent, whilst also attracting the right skills and experience.
What are the key drivers that promote satisfaction at work?
Extrinsic rewards are tangible, covering pay, bonuses and benefits. Intrinsic rewards cover the psychological benefits each employee gains from taking pride in the meaningful contribution they make. Every single employee will value a different combination of these factors; it will not be a case of promoting one type of reward over another. Whilst extrinsic rewards have dominated reward schemes for generations, there has been a cultural shift in focus. Routine and bureaucratic jobs relied on pay to motivate staff. However, a plethora of jobs now exist where employees are able to use their own initiative, driven by rapid technological change.
Pay as a hygiene factor
Extrinsic factors will always be important. At Paydata, we always stress that pay is a hygiene factor that needs to be competitive in order to ensure it does not demotivate. As reward specialist and author Dan Pink wrote: “Pay people enough to take the issue of money off the table”. Employees must feel they are paid adequately before they are able to be motivated by other elements of the reward package – namely cultural and environmental factors and any opportunities for personal growth. Once the question of pay is satisfied, this unlocks the value each employee derives from the wider benefits they can access.
Transparency and fair pay practices
People’s major focus is nearly always on extrinsic rewards, with pay at the top of the list. We have not found any evidence that this varies by age or generation, and it may reflect how their organisation defines reward. Only after we get people to ‘park’ their focus on pay are we able to have a meaningful discussion about the intrinsic rewards. This reinforces the view that businesses need to ensure that they have ticked the box for fair pay and benefits, before they can expect employees to focus on the intrinsic rewards and truly thrive.
We categorise reward structures for clients into four areas: 1) pay, 2) benefits, 3) personal growth and 4) culture and environment. Salary benchmarking is an important way in which you can be transparent and open about the objective, data-driven method involved in determining each employee’s pay and ensure that you are offering competitive pay across your organisation. Once employees know that they are being paid fairly in relation to the market, this progresses the conversation around how reward packages fuel employee engagement. The focus shifts from pay to a more values-led perspective, covering culture and opportunities to develop.
Trends that skew official pay figures
Our Reward Management Survey has captured ten years of reward trends and identified the growing trends in relation to paying a premium for new talent. More than half of respondents experienced difficulties in retaining people and 66 per cent experienced challenges in recruiting people over the past 12 months, leading to two thirds of employers paying new recruits up to ten per cent more than current employees in the same role. This suggests that loyalty no longer equates to larger pay packets.
However, another key trend around pay practices that we have been monitoring includes out of cycle pay increases. Respondents to our UK Reward Management Survey said they most commonly accounted for up to one per cent of annual pay bills. 75 per cent cite market pressures as a key driving force behind the use of these incremental pay increases, suggesting they are being used to supplement steady pay awards as they bridge the gap between official pay review figures of three per cent over the past year and wider market pressures.
Keep up to date
There are a myriad of factors that affect employee satisfaction, but remaining ahead of the curve when it comes to anticipating reward trends will help you to keep your strategy relevant and engaging. Paydata’s recent research into employee benefits highlighted how employers are taking an increasingly creative approach when it comes to defining which employee benefits suit their employees. Whilst the traditional benefits of pension schemes and life assurance topped the list, employee assistance programmes closely followed these. 83 per cent of respondents have policies and procedures in place to support mental health and wider wellbeing in the workplace, signalling that when it comes to supporting their workforce, employers acknowledge their increasing responsibility.
More creative benefits consistently feature that relate to employee health and wellbeing. 70 per cent offer bike to work schemes, 42 per cent offer gym memberships and 57 per cent offer health check-ups, showing that many businesses are looking to support health and wellbeing. This illustrates the different approaches organisations take when it comes to defining wellbeing in the workplace.
Have your say
Register now to contribute to the UK Reward Management Survey for spring 2020 – in return for ten minutes of your time to complete the survey, Paydata will send you a free copy of their Spring Reward Management Report, which captures reward trends across a variety of sectors and informs HR professionals about the current practices they are implementing to retain and recruit the best talent.
Take pay off of the table to truly motivate and retain your workforce by getting in touch with us: www.paydata.co.uk