With January’s latest Office for National Statistics figures showing UK employment levels at a record high and average earnings up by 3.3% – the biggest rise since the collapse of the financial markets in November 2008 – you might think that there are good omens for a rewarding year ahead among the UK workforce.
However, the Institute for Employment Studies' (IES) review of the research evidence leads us to suggest that, with real wages up by barely 1%, you shouldn’t expect your eternally grateful employees to come showering their well-remunerated bosses with gratitude anytime soon. The last decade has, on some measures, been the worst for UK wages and living standards for 200 years, with the inflation-adjusted median rate of pay still almost £5,000 a year lower than when Lehman Brothers ceased trading.
And, while we at IES have been celebrating the remarkably positive impact of the first year of compulsory gender pay gap reporting, the International Labour Organization's Global Wage Report also found the UK still has one of the highest median gender pay gaps for hourly wages among the biggest economies in the world.
In the UK, over the past decade we have seen a shift towards a low-skills, low-paid, low-engagement, and low-productivity workforce. The wider social impact of low pay and low pay awards is worrying. Four million British workers now live in poverty according to the Joseph Rowntree Foundation’s UK Poverty 2018, and the majority of children living in poverty are in families with parents in work.
Nor is this a great context for chief executives and HR directors trying to re-engage their workforces to achieve higher performance. Today, in too many cases, their ‘total rewards’ terminology fronts the same vanilla copycat benefits choices and platforms. The irony of glitzy employer marketing of ‘the employee experience’, when many engagement surveys show employee ratings for their workplace and experience declining, seems to be lost on many HR functions.
With the belated return in the economy to real pay growth, we believe that there are opportunities and signs of hope amid the Brexit uncertainty. We've highlighted six key areas to focus on in your 2019 reward strategies, all concerned with the subject of total rewards and making it a reality for people.
- Recognise that any effective total rewards package is based on a secure foundation of a decent base pay level.
- This means we need to see the re-establishment of genuine base pay progression in more workplaces.
- Employers need to join up their pay and reward policies with talent and diversity management practices. Nationally we need to re-imagine female-dominated professions such as caring as valuable and higher-skilled occupations. HR needs to re-learn the benefits of providing internal development and progression over making expensive and often less effective external hires, and re-enfranchise the rest of the workforce with its talent management policies.
- Real total rewards mean the government and employers better joining up their employment and pay policies. As professor Paul Sparrow argued at IES’ annual HR conference, HR needs to relax its ‘vertical’ boardroom obsession with business strategy alignment and play a wider ‘horizontal’ role to contribute to major social and political challenges such as the impact of technology, skills and education.
- Employers and HR leaders also need to do more to link their reward policies for their most senior, middle and lowest-income employees. New regulations make it a statutory requirement as of 2019 (reporting in 2020) for companies to disclose the ratio of their chief executives’ remuneration to the median pay of their UK employees every year. We hope the new legislation will help develop a better dialogue between boards and employees; hopefully with more profit-sharing and employee share schemes being introduced.
- Finally, for employers genuinely seeking to address employee needs, we would highlight two areas for greater emphasis in 2019: mental health support and employee financial wellbeing. Both of these have been well-covered on the pages of HR magazine over the past 12 months. In 2019, with the new Single Financial Guidance Body hopefully providing improved tools and backup, expect to see far more employers giving all of their employees help with financial wellbeing by providing financial education and support.
Employee engagement to high performance through total rewards is ultimately about what potential recruits and employees perceive and receive, not what employers promote, provide and ‘push’ onto them.
It’s about taking, not abdicating, responsibility for your people, their reward management and the wider society we are all a part of. It is about best fit, not best or supposedly leading-edge practice, ‘carefully matched to the goals, culture, and political realities of the organisation’ (Heneman and Ledford, 2002).
Duncan Brown is head of HR consultancy at the Institute for Employment Studies
