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Pay has been a hot topic for HR and Reward professionals. At Innecto we work with various clients to help navigate the tricky waters of pay reviews. A key question for many remuneration committees is what the forecast for pay will be in 2024 and beyond.
Based on our extensive work, we have identified seven key themes for 2024:
Inflation is falling, but not as quickly as predicted. A sustained period of higher prices will continue the cost-of-living pressures for the workforce. Prices will continue to rise above the Bank of England’s target of 2% in 2024. Even once at a controlled level, a reduction in living standards will continue for many employees whose pay has not kept up with inflation.
Significant increases in living wage and split awards focusing on the lowest paid are creating wage compression challenges. The focus on the lowest paid during this period of rising cost of living has been the right approach. Affordability has restricted how far companies can go to meet these needs. The rising floor of pay for those at the lowest grade is creating a challenge for some supervisory and skilled pay grades as the pay differential has been eroded during recent pay rounds. This wage compression puts pressure on companies to ensure that skills and competencies in these roles are recognised.
Reviewing pay once a year isn’t enough in a fast-paced and evolving job market. The concept of ‘real-time’ data is an emerging trend in reward. This has been driven by employers facing recruitment challenges for specific roles where the ‘market rate’ has shifted significantly. Employers have been turning to a more agile and fluid approach, targeting pay reviews at certain groups or conducting multiple checks throughout the year. Scanning the horizon throughout the year can highlight early on potential recruitment or retention risks and ensure necessary budgets are set to address pay gaps during a review.
The number of vacancies is reducing but the battle for key talent in certain skill sets rumbles on. The recruitment boom following the lifting of restrictions fuelled rising levels of pay and a rise in average earnings with an increased amount of the workforce moving roles to secure remuneration packages. Vacancies are now falling but remain higher than pre-pandemic levels and do not point to a complete reduction in retention challenges. Market premiums remain in specific industries and critical roles, with companies still competing on pay for key talent.
Pay decisions need justification as transparency increases. The increasing number of legislative reforms are moving the discussion on pay transparency from ‘best practice’ to an essential cornerstone of the reward framework. A recent survey by Payscale found more than half of respondents (56%) have been driven to improve compensation practices in response to legislative changes. The increasing narrative on the justification of pay, and focus on differentials, will have a far-reaching impact, including companies without an EU presence.
Pay policies need to support DE&I policies and not work against them. Often pay policies can remain untouched for years. Employers will need confidence that pay policies are driving the desired results. Gender and ethnicity gap reporting is a start to understand the impact of pay policies. Striking the right balance between fairness and equity within the pay approach is essential to the employer-employee relationship, and to retaining the best people.
High pay awards were never a sustainable solution. The 2024 pay award will be pivotal for those moving towards more sustainable pay awards, particularly where the overall award will be less than the 2023 uplift. Employers are likely to need to take a more forensic analysis of the total pay outlook. This will include a review of wider benefits or initiatives to ensure that the total package remains an attractive proposition.
How Innecto can help
Staying on top of a Reward Agenda is an ongoing challenge, particularly in the post-pandemic environment of high inflation and a tightening labour market. At Innecto, we have spent more than 20 years working with clients in designing and delivering reward programmes in a range of industries. Many clients continue working with us beyond the initial project end as they shape and adapt reward programmes to the changing environment.
Innecto offers a flexible Reward on Demand Retainer Service that doesn’t require a commitment to large-scale projects. Our service is agile enabling a level of service and access to our consulting team and resources based on requirements and budget. Essentially, we become an extra pair of hands or much-needed expertise at a time when it is needed. This could be in the form of ad hoc technical reward support, ongoing maintenance on existing reward systems, auditing effectiveness, supporting with iterative improvements, or tapping into a library of resources and tools.
Reward on Demand bundles vary in price and are valid for up to one year from purchase. Buying a bundle of consultancy support upfront gives you the certainty of access to high-quality reward expertise at a discounted rate.
You can find out more information here or speak to a consultant on +44 (0)20 3457 0894 and we will send you our latest brochure on Reward on Demand.
