CIPD research reveals death of the traditional annual pay rise

Almost half of organisations (46%) no longer award employees an across the board annual pay rise or cost of living adjustment, according to this yearís Annual Reward Management survey from the Chartered Institute of Personnel and Development (CIPD). Manufacturing, production and private sector service firms are the least likely to provide such a pay rise.

The current trend is to allocate pay budgets to departmental heads to distribute among staff based on individual and or collective contribution, and movements in market rates and inflation, rather than as an across the board rise.

Under these circumstances there is a greater need to communicate pay messages clearly. However, CIPD research shows only one third of employers are confident in their line mangers ability to deliver the appropriate pay messages.



Charles Cotton, CIPDís Employment Conditions and Reward Adviser said: ìThe decline in the yearly traditional pay rise seems to be spreading throughout employment sectors. Gordon Brown for example has announced new plans to abandon annual pay negotiations in favour of a three yearly settlement for public sector workers.

ìChanges to pay and reward packages can often leave employees confused, demotivated and in the dark about what they need to do to achieve reward and recognition. Line managers can play a key role in delivering messages around pay, but they need to be coached and developed on how to communicate messages around pay increases and benefits more effectively.î

Itís not only the traditional across the board pay rise that is on the wane in the private sector, but also the final salary pension scheme, with only one fifth of organisations keeping them open to all employees. Specifically within the manufacturing and production sector, 50% of firms have closed their pension schemes to new entrants, expected to increase to 68% this year. The survey detects an increasing number of employers putting more money into defined contribution pension arrangements, reflecting a concern that going forward employees may not receive a decent pension.

The environment has also become a major concern to organisations with over three fifths (62%) of employers having reviewed reward policies to ensure it supports environmental strategy. The most significant driver given for carrying out these reviews is to enhance and protect their organisationís reputation.

Cotton adds: ìThe shift in pay practices from those that solely reward financial achievements to those that recognise environmental goals suggests an increasing concern with employer branding. Attempts to align the environmental practices with the employer and product brands can make it easier to attract, retain and motivate talent as well as retain and attract new customers and clients in an increasingly competitive market.

ìHow you reward and recognise employees sends a powerful message to employees at all grades about what your organisation regards as important. If you claim a green philosophy then this should be reflected in your reward principles, strategy, policies and practices.î

Other key findings

70% of organisations use cash based bonuses or incentive plans. Broken down by sector 86% of organisations in the manufacturing and production sector, 89% in private sector services and 30% of voluntary and public sector services provide cash based bonuses.

Only 40% of employers plan to amend their current bonus scheme or introduce new schemes.

Over one third of employers operate both recognition and non-cash incentive schemes. Private sector and larger employers are much more likely to operate such plans.

75% of employers use a combination of factors such as individual performance, market rates and team performance to determine an employees pay progression.

1% of employers use video/DVD, blogs or podcasts to communicate pay messages

82% of private sector organsiations use meetings with line managers to communicate pay messages

88 % of public sector organsiations communicate pay messages through HR