CIPD reward study hints at impact of gender pay reporting

Around two-thirds (68%) of the 700 employers responding to the Reward Management: Focus on pay survey said they are open about how pay levels and increases are set, with almost a third (31%) favouring "great" transparency.These figures have increased on the previous study, published in 2015, where only half of respondents reported being in favour of pay transparency unless compelled to disclose details by legislation.The CIPD’s study also found 71% employers are open about how pay rises have been calculated, with 59% transparent about the size of wage increases awarded as a result of those processes.Very large organisations (10,000+ employees) are also most likely to be open on pay and this is most evident in the public services sector.

Gender pay and reward management

The CIPD believes this openness, particularly among larger employers affected by the gender pay reporting requirements, may in part be driven by the introduction of legislation to promote transparency and fairness.Two-thirds (70%) of employers believe gender pay gap reporting will help to reduce the disparity, which currently stands at 9.1% for full-time average earnings.A similar proportion (67%) felt it would help to reduce the gap “to some extent”, while 30% don’t believe it will have an impact at all.Three in one hundred were more optimistic and felt it would reduce the gap to a “great extent.” Here, very large organisations are those more likely to expect gender pay gap reporting to reduce the gap to “a great extent” (9% of very large organisations). 

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'Shift in business accountability'

Charles Cotton, senior reward and performance adviser at the CIPD, comments: “While we’re still some way off from seeing full disclosure on pay and reward, there are strong indications that employers are increasingly willing to be open about the processes behind their pay decisions, and in some instances, the outcome of these."This trend is part of a much wider shift in business accountability, which we’re seeing through gender pay gap reporting and calls for greater transparency on executive pay."Fairness, inclusion and equal opportunity are at the heart of good work and increased transparency gives organisations the chance to explore their pay practices, as well as shed light on wider workforce issues. We expect the Financial Reporting Council’s latest proposals for a revised UK Corporate Governance Code to add further momentum to this trend.”

Linking pay to performance – key trends

When it comes to linking pay with performance, the survey found most employers still adopting quite traditional practices. Most (91%) assess performance against individual goals. More than half (53%) of this group use performance reviews to inform salaries and other reward decisions.Take-up of less traditional methods of performance assessment is much lower. Just 27% of employers have adopted 360-degree assessments and only 24% use peer assessment.However, the CIPD believes the latest survey offers evidence to suggest employers are becoming more creative in some areas of reward to improve their organisation’s performance. Where group reward schemes are in place, there has been dramatic growth in the use of gainsharing, where employees receive a bonus of linked to productivity improvements or a cut in production costs. This was in use by 41% of organisations in 2017, compared to 20% in 2015.

Pay and reward strategies for in-demand skills

Companies are also paying more attention to market rates for talent in key sectors. This is now the most important factor in determining wage levels for 70% of employers, according to the study.However, the influence of market-based pay reduces in subsequent pay rises once a person is in their role, with decisions more likely to be based on performance, competencies and skills. This leads the CIPD to warn of mismatched salaries for people in the same role. “While skills and labour shortages are driving up starting salaries in certain sectors and locations, this pressure doesn’t seem to be having any impact in influencing how workers progress through their pay bands,' explains Mr Cotton. "There could be employee relations issues in the future if new staff are being paid more than existing staff for doing similar jobs."Reward professionals need to ensure that recruitment salaries are justified and look at job and task redesign in order to boost productivity and increase pay for all employees.”For related news and features, visit our HR section. Look out for the launch of 2018's Relocate Awards, entries open in January. Relocate’s new Global Mobility Toolkit provides free information, practical advice and support for HR, global mobility managers and global teams operating overseas.Access hundreds of global services and suppliers in our Online Directory

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