Is this the demise of the pay rise?

‘The most sustained and severe fall in wages since at least the Second World War’, according to a report released today by the CIPD.  It seems that despite the improvement in the UK’s economy, there are further economic challenges ahead and an unrelenting tightening on household finances, with weekly earnings between 7.8% and 10.2% lower than they were five years ago.  The UK is not alone in the grey area of non-existent pay rises; the US continues to struggle with an average full-time worker’s wage being no higher than that in 1979.

The report recovered the following results:

  • A third of employees expect no pay increase in 2014
  • A further third expect the same rise in 2014 as in 2013
  • Last year only a minority of 36% received a pay rise equivalent to improve standards of living

We have being speaking a lot about the challenges facing managers in today’s workplace, with results from our recent survey stating that “implementing change initiatives will be the biggest management challenge in the coming year”.  However, the outcome of this report highlights a further significant challenge for managers in terms of finding ways to ensure continued motivation and improved performance among their employees, without the promise of increased pay.  What is the best way to overcome this?  Communication.  If this situation is affecting your organisation, it is vital that your employees understand the reasons behind the lack of pay rise so moral does not diminish.  Discussing the benefits of a wider reward package through pension plans or increased investment in training and development will help.  Employees need to be reassured that despite the lack of pay rise, they are still appreciated and being invested in.

An increase in the UK’s productivity is key and through focusing on accumulating demand for higher level skills, an emphasis should be placed on training, and development of employees’ skills.  To ensure your organisation invests in the best possible impactful training, take a look at our website.  Mark Beatson, Chief Economist at CIPD, commented saying: “We need to recognise as a nation that real increases in pay will only be delivered through increases in productivity – and that for this to happen we need employers, employees and policy makers to come together in a combined effort to improve UK productivity.”

What is the state of pay rises in your organisation?  Is this another significant challenge you need to address?

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