Strategy on pay awards

One of the questions we are asked occasionally is what level should salary increases be pitched at for the next financial year? Now, this is arguably a financial/business planning exercise rather than a long-term, strategic planning issue, but some analysis of the wider labour market and its drivers should be part of any strategic plan.

The Labour market driver will address this broader issue, but in the meantime a few pointers might be useful. ONS reckons pay settlements (or, technically, Average Earnings Increases) in the UK economy are currently running at about 3.5%, a figure that seems to have fallen slightly. Although unemployment is low (5.4%) and falling, and inflation is starting to be a concern again (RPI is 4.1% and rising), it’s probably the case that popular expectations regarding the prospects for the economy are sufficiently downbeat to lower earnings expectations. Sadly, they are not cheap, but you can glean a surprising amount of intelligence from published summaries or press releases. The CIPD has an excellent review of where to look and what to look for.

Public sector increases in earnings are lower at 2.9% – again, the current mindset is one of belt tightening. Given the increasingly blurred boundary between the public and third sectors you might expect public sector settlements to be an important benchmark; indeed, many local organisations still use the NJC scale as a benchmark.

All relevant to strategy, but I suspect you are already asking for stats that are specifically about the third sector. It gets a bit messy now as there just isn’t the same level of evidence for our sector, but there are some surveys available. Sadly, they are not cheap, but you can glean a surprising amount of intelligence from published summaries or press releases. I identified two: Croner Reward’s charity survey and CELRE’s voluntary sector salary survey. (NB: NCVO is involved in the CELRE survey) ACEVO also produce a CEOs salary survey.

In thinking more broadly about pay and benefits strategy we of course need to remember the sector doesn’t operate in a vacuum: there is (mostly anecdotal) evidence that people are moving between sectors more than ever, so setting remuneration needs to take account of what’s happening in terms of parity with other sectors. But there are other things to think about: for example, the unions are getting agitated about differentials between senior staff (esp CEOs) and the rest of the workforce. All charities should expect the heat to be turned up in relation to CEO remuneration, particularly as these data are increasingly in the public domain. The Guardian was doing this as long ago as 2003.

Thinking about the other end of the scale, notions of social justice and concerns over absolute levels of poverty in the UK have powered campaigns for better low pay, and in particular the concept of the living wage It will be interesting to see whether charities come under pressure to pay a living wage, particularly given broader pressure around the corporate responsibility agenda.

Last updated at 15:08 Mon 18/May/09.
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How will this affect your organisation? Have you considered it during your strategic planning? Can you share any interesting relevant links?

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