- The average salary increase in the private sector is predicted to be 5% for 2023, however the average UK worker feels that 9% is a fair award . . .
- Some companies are considering one off bonuses to acknowledge the cost-of-living crisis, but not lock in a high pay award for future years . . .
- Don’t forget about ‘Total Reward’; salary is important but may be only one factor coupled with other important benefits . . .
- Consider what may be important to different generations…
- If you need help or advice on your pay strategy for 2023 and beyond, we have a depth of knowledge, experience and skills within our team, and we’d love to have a conversation.
Several our clients are grappling with how to address 2023 pay awards and the cost-of-living crisis facing their employees whilst maintaining margins and costs to their customers. With Nurses demanding 5% above inflation (as of Feb 23 running at 10.5%) how do employers decide the right % for their employees?
We have compiled some helpful hints and tips for you to consider when setting your pay strategies for 2023 and beyond.
Cost of Living Crisis?
The news is full of stories about people struggling with their heating bills, hiked up food costs and inflation busting pay awards, but is it all real? It’s important to remember that whilst there is genuine distress for some people (and your employees) across the UK, others are coping fine. Lloyds Bank reported last week that 70 to 80% of people were concerned about the cost of living but only 20% of people were making changes to spending such as cancelling subscriptions and changing to lower cost food brands.
Picking a % increase for 2023
Whatever number you use it is important to consider that you are locking the new salary in for future pay awards, pension contributions and other benefits which can’t be reduced later. With the Bank of England forecasting inflation to fall to below 4% during 2023 awarding a block busting double digit pay award to employees, whilst very welcome, essentially locks this number in for future years.
It is however important to ensure that your roles remain competitive within your industry and that employees are not tempted to be lured away for higher salaries elsewhere or even worse to a competitor!
The average increase in the private sector is 5% for 2023, however the average UK worker feels that 9% is a fair award.
Pay for performance
When setting higher than normal pay increases, employers should not lose sight of rewarding higher performers appropriately. This can be challenging because these employees may not be facing a cost-of-living crisis personally and it’s tempting to reward lower earners. But remaining competitive is important for higher performers who are more likely to move employers, if they feel that they have lost out.
We have a track record of working with companies to help them build their career structures in such a way to ensure that employees know what good looks like, and how they can progress in their career.
A one-off bonus?
Some companies have considered a one-off bonus to acknowledge the cost-of-living crisis but not lock in a high pay award for future years. There are lots of benefits of doing this, but also some negatives which employers should consider when using this strategy. Whilst popular in the immediate term, any award can soon be forgotten about later in the year and of course can’t be recovered if employees decide to move elsewhere. We can help build this strategy to ensure you get maximum ‘bang for your buck’ if this is your preferred way to help employees.
Total Reward Package
One thing employers often forget about is the total reward package to an employee. Salary is of course an important component but there are other ways to reward employees in addition to salary. Adding benefits can be cost effective and welcomed by employees but it is important to consider your employee demographic when considering which benefits would be most welcome and best suited.
It is also important to understand what your competitors are offering, which can be difficult when SMEs are competing for talent with big multi nationals, who usually have a much-enhanced offering for employees.
When building pay structures, it is important to consider what motivates different generations. Generation Zs are motivated differently to Generation Xs so it is important how any career and reward strategies are framed to ensure that you keep hold of your key talent as they progress through their career.
Impact on benefits
One important note when considering pay increases or one-off bonuses is whether these will have a negative impact on employees who receive universal benefits. A one-off bonus may feel the right thing to do but could disrupt benefit payments for more than 6 weeks.
People not at work
It is also important to ensure fair treatment for employees on maternity, paternity or family leave.
If you need help or advice on your pay strategy for 2023 and beyond, we have a depth of knowledge, experience and skills within our team to help. Please email us