Pay leads the way

With pay rises hitting a two-year low and widespread dissatisfaction with compensation packages, it’s time companies reassess their approach to remuneration to maintain a competitive edge in the talent market.

According to data from Brightmine, the median basic pay award in the UK dropped to 4% in the three months to August 2024, the lowest since June 2022. Nearly three-quarters (72.7%) of pay awards were lower than those given to the same group of employees a year ago.

The public sector is currently outpacing the private sector in pay rises, with a median award of 6% compared to 4.7% in the private sector over the 12 months to August 2024. This shift follows the new Labour government’s acceptance of pay review body recommendations, resulting in above-inflation pay rises for many public-sector workers.

Employee perspectives 

Research from SD Worx highlights the critical role of salary in employee decision-making. It found that 62.3% of UK workers cited money as the most decisive factor when choosing a company while 46% stated that long-term pay dissatisfaction would prompt them to leave their current employer.

Only 47% of the workforce is satisfied with their pay overall and just 49% feel their current salary is competitive in the labour market.

Financial wellbeing

A study by the Reward & Employee Benefits Association (REBA) in association with WEALTH at work identified several barriers to improving financial wellbeing support in the workplace. According to the study a surprising 76% of employers believe employees don’t know where to start when asking for help.

Insufficient communications were cited by 69% of respondents, while 59% noted a lack of uptake for existing financial wellbeing support.

Strategies for improvement

With less than half of employees satisfied with the transparency of their pay package policy, clear communication around salaries and benefits should become a priority.

Personalised pay packages are also an issue as only 25% of employees reported being able to do so. Offering more flexibility and choice in benefits helps to meet diverse employee needs.

While employers say they plan to increase offerings such as financial education, coaching, and advice on general finances and retirement planning, they could also benefit from factoring in other considerations:

• Introduce Savings Products: The provision of tax-free saving wrappers, including ISAs, is set to more than double from 14% to 30% among surveyed employers.
  
  
• Address Cost of Living Concerns: With inflation and rising costs for childcare, rent, and energy identified as key risks to employee financial wellbeing, companies should consider targeted support in these areas.
• Improve Communication: Ensure employees understand the full value of their total compensation package, including all benefits and perks.
  
  
• Regular Benchmarking: Continuously assess compensation packages against market rates to remain competitive. 
  
  
• Invest in Financial Education: Help employees make informed choices about their finances, regardless of their life stage or circumstances.

By implementing strategies like these, companies can create more attractive and effective compensation packages that address the evolving needs of the UK workforce.

As Laura Miller, UK People Country Leader at SD Worx, notes, "Money matters, absolutely, but employees also place high value on a personalised benefits package that supports them how, when and where they want it."