How to hit the right note with pay

Mixed messages this week in a flurry of research reports that have come out looking at pay trends for the year ahead. The CIPD predict that employers will put a brake on pay rises thanks to increasing employment costs and says that salary expectations are at their lowest for two years. Korn Ferry Hay Group, on the other hand, says that workers can expect to see real wage increases of 2.5 per cent, the highest in three years.

The reality, of course, is that it’s likely to be a mixed bag and some sectors and specialisms will fare better than others. Reed’s report on average salaries shows that recruitment, financial services and IT are likely to do well, while there’s a less positive picture for those working in customer service, social care or hospitality.

What is clear, however, is that there are still significant levels of dissatisfaction among employees when it comes to pay. A recent article in The Independent suggests that one in five employees are looking for a new job, with unsatisfactory pay among the top three reasons (alongside poor management and not feeling valued) for wanting to jump ship.

Getting pay right can be a real challenge. The company needs to keep the salary bill at a manageable level – but if salaries are out of line with the rest of the market, there’s a real risk that key talent will start to look elsewhere.

So what steps can the business take to make sure it’s hitting the right note with pay and has strategies in place to hang on to good people?

1. Map your employees

An in-depth knowledge of the make-up of your workforce will give you the data you need to make informed decisions about salary levels. It’s worth spending time mapping out the detail. What skill sets do you have in-house? What’s the average length of tenure? What salary range are you looking at across the various disciplines? When did people last get a pay rise? If you are employing a large proportion of people with skill sets that are in high demand, you need to think about how critical these are to the business and how easy it would be to replace people if they headed out the door. Look back at the records of exit interviews too. If pay is frequently mentioned as a reason for people leaving, then it’s clearly an area that needs attention.

2. Research the local job market

Make sure you know what is happening in your local job market or specialist field. Talk to your recruitment agency, visit job boards, scan the adverts in local or professional press (both print and online). Companies like Reed also publish information about average salaries across a range of sectors. This should give you a good idea of the going rate for the job and will enable you to benchmark your pay rates against competitors or other local employers. Recognise that your employees will be very aware of how the business stacks up when it comes to pay. They will be reading their own professional press, talking to peers and even if they are not actively job-hunting, are probably still signed up to job alerts. It only takes one employee to start going for interviews and talking about how much the grass is greener elsewhere for others to start feeling unsettled.

3. Identify the gaps

Put your benchmarking information into a chart together with the breakdown of your workforce. This will give you a helicopter view and help you understand where you may be falling short – or in some cases, maybe paying well or even above the market. Share the information with senior management and discuss where the gaps are and what strategies you might put in place to fill them. It’s worth keeping line managers in the loop about average pay rates too. They are the ones who will be having career conversations with their team, and if they are equipped with the right knowledge, they will be better able to field questions and make sure people are not being misled about what their job is really worth.

4. Communicate clearly about pay

People often don’t appreciate the full value of their employment package, so you need to remind them regularly about the benefits they have over and above their salary. Often, when employees sit back and consider their private health insurance, pension, child care vouchers, company car …. they realise that their overall package is worth a lot more than they thought. The problem is that people are often given this kind of information when they join the business – and then it’s never mentioned again. Make sure you communicate at regular intervals to remind people of the benefits they have access to and to encourage take-up. If you’re getting a lot of questions about salary increases and you’re not able to offer a rise right now, explain the reasons why to people and give them an idea of when the situation will next be reviewed.

5. Consider alternative strategies

If significant pay rises are really not an option, think about whether there are ways you could free up funds to make just a small increase across the board or to reward key staff. Out-sourcing non-critical activities, for example, could help the business save money. Moving IT systems to the Cloud can also be a cost-effective way of giving employees access to the latest technology without the need to invest in expensive hardware and constant software updates. Think carefully about whether you need to replace like with like when people leave. Could you consider bringing in a graduate, for example, that you could train up to fill future skills gaps?


It’s true that pay isn’t the main motivator for everyone. People may accept a salary that’s lower than they could achieve elsewhere because they value a friendly culture, flexibility and opportunities to learn and grow. But don’t bury your head in the sand. Everyone is open to temptation and if a competitor comes knocking on the door your employees will be more of a flight risk if they can see you’re not ‘on the money’ when it comes to pay.

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