More than two-thirds (68 per cent) of employers say that they are open about how pay levels and pay increases are set, with almost a third (31 per cent) favouring ‘great’ transparency.
This suggests that employers are moving towards greater openness about reward management, according to the latest Reward Management Survey from the CIPD. Its previous survey (in 2015), found that only half of respondents were in favour of pay transparency, unless compelled by legislation.
Pay rise calculations
Nearly three quarters of employers say they are open about how they calculate pay rises, and more than half are ‘transparent’ about the size of the salary increases awarded. The research found that very large organisations – most evidently, the ones in the public services sector – were more likely than smaller ones to be open on pay.
Gender pay gap reporting
Two-thirds (70%) of employers surveyed believe that gender pay gap reporting will help to reduce the gender pay gap. More than two-thirds (67 per cent) felt it would help to reduce the gap ‘to some extent’, while only three per cent felt it would reduce the gap to a ‘great extent’.
However, nearly a third of employers don’t believe it will have an impact. The size of an organisation had an impact on its view of gender pay gap reporting: according to the research very large organisations are more likely to expect gender pay gap reporting to reduce the gap to ‘a great extent’.
“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,” says Charles Cotton, senior reward and performance adviser at the CIPD: “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.”
Nine out of ten employers still choose to assess performance against individual goals. Of that number, more than half use this approach to inform salaries. In contrast, take-up of less traditional methods of performance assessment is much lower. For example, around one in four employers have adopted 360-degree assessments.
Market rates are the most important factor when it comes to determining wage levels, says the research. It says that 70 per cent of employers say they are paying more attention to market rates, as competition for talent in key sectors becomes apparent.
However, once someone is in a key role, market-based pay is less likely to have an impact on what they earn. The CIPD says this could lead to a mismatch in salaries for people in the same role.
Cotton says: “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. There could be employee relations issues in the future if new staff are being paid more than existing staff for doing similar jobs.”