Summary of the editorial from IDS Pay Report 995, February 2008

How far is pay determination changing, asks CIPD

IDS research finds that annual pay awards are very much the norm across the UK. Many of these set a single percentage rise that affects almost all of the staff, but probably not the managers and senior managers. Some have underpinning sums of money that give a higher percentage to the lowest paid. Some set a budget for the annual pay review, of say 3.5 per cent, which is then passed down to line managers for distribution to staff based on performance criteria. In virtually all long-term pay arrangements the increases set for the future are based on annual increases on the anniversary of the initial pay review. Our own research would suggest that the only tendency to move away from annual pay review cycle is in fast-moving parts of the economy where pay rises occur every six months or so for fast-track employees in key roles.

So it comes as a bit of a surprise to find a CIPD press release announcing: ‘CIPD research reveals death of the traditional annual pay rise’ (24 January 2008). Delving further into the text we find that this headline is mostly spin and that there is some confusion between the terms ‘traditional’ and ‘annual’. The CIPD research refers to its annual reward management survey which this year found that 46 per cent of organisations ‘no longer award an across the board annual pay rise or cost of living adjustment’. This conclusion is drawn from asking reward managers whether pay rises are across the board or more individualised, and of course the latter method has increased considerably over the past two decades.

But whichever the method, most organisations start off with a budget for the annual salary review. If they conduct negotiations with a union or unions they will try to stay within that budget or seek some offsetting element of productivity changes during the negotiations which allow the budget to stretch. If there are no unions to negotiate with then the budget is generally set centrally and then passed down for implementation. If a particular occupational group or skills set is hard to retain, for whatever market reason, adjustments to the budget will be sought.

... the full editorial can be read in IDS Pay Report 995