At this time of the year, many organisations who work to the calendar rather than the tax year are caught up in planning and budgetary meetings for the forthcoming 12 months. They are also in the midst of Christmas party fever, mass chocolate guzzling and secret Santa mania. At the same time as these important work and social demands, many businesses have also been turning their mind to end of the year reviews, salary and bonus considerations.
The press has also expressed a real interest in pay reviews. The most recent headlines have featured the following issues: the lack of private sector (voluntary) equal pay reviews, the controversial 11 % proposed pay increase for MP’s from 2015, the slight increase in ‘normal’ pay awards (now averaging at 2%) compared with the last few years of freezes and cuts (although these are still apparent in some areas), the steep rise in living costs exceeding any wage rises and the TUC’s demand for an increase in the minimum wage to off-set this.
With these very real issues at play, how can organisations review and set pay fairly? Firstly, are you contractually obliged to review pay at a certain time of the year? If so and also if you or the employee have any concerns, then a review should be carried out bearing in mind that a review is not a commitment to a rise but to consider the pay level and to make a decision about whether it is still appropriate.
The appropriateness of the pay should be in relation to the available budget of the business, external market data (other pay awards, what the competition pays and how it values the role especially within your sector and region), the cost of living, internal data (especially in relation to others within the same or similarly valued roles, ideally assessed through job evaluation and by equality to ensure no discrimination takes place) and also if appropriate to your review processes (for example through performance based pay linked to appraisal scores), to the performance of the employee concerned. The aim of a review should be that the outcome is informed, legally justifiable and felt overall to be fair.
This does not mean that you will always meet the expectations of your employees but that you can sleep well over the festive period in the knowledge that you made the right decisions based upon sound information and fair judgement. In addition, if as open a process as possible is put in place, this will help employees to understand both where they stand and what they can expect for the forthcoming year.