Last month, we ran the Pay Trends Roadshow 2017. We talked to HR professionals about the key issues coming up this year. In this Pay Trends 2017 blog series, we are sharing the highlights of the Roadshow. You can read part one here, or read on for part two covering the main legislative areas you need to act on to ensure your organisation makes the grade.
Low pay
One of the main issues in the low pay area is national living wage. NLW will increase this April from £7.20 to £7.50 – an increase of 4.2%. In the long term, NLW is expected to increase to £9 an hour by 2020, so HR will need to think about how to manage pay differentials within the organisation.
Economic factors and Brexit also have impacts here. Businesses with high numbers of low paid workers will be more affected by potential changes to immigration regulations and pressure from higher inflation will reduce the impact of pay increases for low earners.
What this means for HR
Businesses will need to refine their employee deals to ensure they look after the little things that make life better for employees.
- Ease the pressure on household budgets by introducing voluntary benefits that use economies of scale such as shopping, restaurant and cinema discounts to help make salaries go further.
- Ensure you have a pay framework in place that allows you to manage pay across levels.
High pay
Scrutiny of executive pay is at an all-time high. There is increasing pressure for greater transparency on executive pay and disclosure of bonus targets. Latest figures from the High Pay Centre suggest the ratio of pay between the CEO and the average employee is 147:1. US owned businesses already have pay ratio requirements and this is likely to spread to the UK. Although the UK already has a high level of disclosure for listed businesses, appetite for full disclosure on sensitive information is lacking. The Executive Remuneration Working Group’s proposal is to report bonus targets retrospectively. Finally, gender pay reporting also creates pressure to attract senior female talent.
What this means for HR
Businesses should focus on metrics and think about the female talent pipeline.
- Focus on more than just TSR (total shareholder return) and consider other meaningful financial and non-financial measures to support increased disclosure on bonus metrics.
- Help shareholders understand the context of decisions that are made around executive pay.
- Do your research into the female talent pipeline – talk to exec recruiters and female high performing middle managers to find out what might be stopping you from attracting more senior women and refine your employee deal accordingly.
Fairness
Gender pay reporting is at the top of many HR leader’s agendas. And rightly so – it is happening now. The 5th April 2017 will be the snapshot date and this includes variable and base pay. Your results will impact your ability to retain and attract talent and may also attract equal pay claims. Gender is just the first step on the fairness journey. Ethnicity is likely to come next with more to follow.
What this means for HR
Make a start on gender pay reporting now to help you get ownership of the situation:
- Find your headlines. If you don’t already know your headline gender pay gaps, work these out now. It will take time to get your data together.
- Manage your risk. Publishing gender pay figures is likely to fuel a ‘no win no fee’ legal process. Carrying out an equal pay audit will help you ensure there are no skeletons in the closet.
- Take control. You want to show improvement as you publish each year so you need to remove unintentional bias and processes that aren’t working.
- Running for real. Have a narrative ready to accompany your results when you publish.
We have lots of great resources available to help you with gender pay reporting. Visit our website or get in touch to find out more.
Look out for the final part of this blog next week, where we will share the five attributes of a high performing employer and how your organisation can create a difference in the current uncertain economic climate. For more information on Pay Trends, call us on: 020 3457 0894.
