Pay Review time has arrived again which may feel like a continuous process: an uphill treadmill of pressure, budget crunching and scenario re-modelling.
According to the latest ONS, inflation-adjusted average weekly earnings in the UK, from May to July 2023, annual growth in regular pay was 7.8%. This is the same as the previous three months and the highest regular annual growth rate since comparable records began in 2001.
Pay has been tightly controlled over the last few years but what will the last quarter of 2023 bring? And, what is the direction for business leaders going into 2024 regarding pay?
The current climate is one of chronically low productivity, widespread industrial action and lobbying to drive up union membership. The high cost of living has exacerbated employee disenchantment and a feeling of unfair remuneration. Meanwhile, Prime Minister Rishi Sunak has been urging that pay rises should be linked to “productivity”. Depending on your sector, it could be that we see polarising approaches to pay review this year.
It might be that something needs to give and typically the solution lies in the ability to find acceptable compromises and the right technical solution can sometimes be the tool that helps manage these challenges. So, what is the correct approach to pay review, balancing affordability and implementation with employee engagement?
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“With Advance, you can set your annual pay review according to your pay practices. With at-a-glance analytics, see how spending is changing pay positioning, and track how pay is progressing against your policy, year-on-year…” |
Internal Data Analytics
First, you need to understand your pay profile. Who is getting what? What does pay compression look like? Is it possible for workers to receive more than those at a level above them, and is there a rationale for that? What is the implication of a change in pay where there are large numbers in low- or high-paid positions? How low are your salaries for your lowest-paid employees compared to the same level in the rest of the market?
External Pay Benchmarking
Pay has always been competitive, but it’s never been more critical. Things are moving at a pace and companies are doing more to understand market movements, competitors’ pay positions and how employee salaries compare with the market. Without doing this how do you identify your flight risks, your under-valued and over-valued roles and any unfair practices?
Join the dots between internal and external data
By connecting your internal data analytics with a firm understanding of the market you can be more targeted in setting pay and determining pay reviews. You can flush out any high-risk departments, positions, grades or individual outliers. You can address low pay, high pay and any unfair practices with regard to tenure, level, gender or ethnicity.
Determine your Pay Pot
With the data at your fingertips, you should be able to identify the potential pay pot you need. This figure is likely to be too high but gives you a useful starting point for deciding the immediacy of your pay review, depending on the gap you face, and putting in place an ongoing pay policy to address any issues.
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“When you’ve got 15,000 employees spanning 40 locations, it feels almost impossible to calculate pay while applying varying principles. Then we found Advance. We didn’t just eliminate time-consuming spreadsheets—we enhanced reporting and engaged our line managers, too.” |
Remodelling the numbers
The most complex part of the process is calculating how to distribute your budget against your new or existing policy criteria. We know from experience that this modelling and remodelling can take time and a lot of collaboration between HR and Finance. Realistically, spreadsheets are no longer feasible or sensible for this. You need a system that runs remodelled numbers at the click of a button.
Line manager review
Once the numbers are settled on, line managers review suggested pay increases – this is often academic but sometimes needs discretionary input for adjustments before going back to HR for sign-off before the adjusted numbers are remodelled.
How do you make all of this happen without using spreadsheets, risking human error and data corruption and landing HR with a massive headache?
You need control. You need Advance
- No manual calculations - Advance automates and simplifies the transactional elements of Pay Review
- No spreadsheets – Advance retains calculations and refreshes remodelled numbers and scenarios at the click of a button
- Customisable dashboards – streamlines the process for line managers
- Reporting suites – produces reports that are easy on the eye and quick to grasp
- Realtime insights - Advance gives you the headspace to direct the process through incisive decision-making and strategic thinking
