HR & Management

Employers could lose talent if they don't communicate pay decisions, warns CIPD

3 min read

03 April 2015

The CIPD has warned that unless employers think strategically about pay and improving communications about pay decisions, each will not only fail to meet rising expectations but are unlikely to see "sought after productivity gains".

The CIPD’s “Employee attitudes to pay and pensions” survey found that despite 63 per cent of UK workers being optimistic about receiving more money in 2015, the average pay rise has remained at two per cent for two years running. This has left 48 per cent of British people unsatisfied with their employer’s pay decision.

Only 51 per cent of workers received an explanation over the pay decision made by their employer in 2014. These explanations cover both the organisation’s decision to increase, cut or freeze the overall pay bill and the choice to raise, reduce or freeze an individual’s pay.

Charles Cotton, performance and reward adviser at the CIPD, said: “This month, many employers will be spending a lot of money on increasing their employees’ pay as part of their annual pay reviews. But to get a return on this investment our research suggests that employees are more likely to be satisfied with the outcome if the organisation takes the time to explain the reasons behind it. 

“Businesses that are willing and able to have these discussions with workers could find that it pays off in terms of a greater employee understanding of what the organisation is trying to do and what it needs from its employees as well as a greater appreciation of how the business will reward and recognise employee success and achievement. These employers are likely to grow and prosper at the expense of firms that are unable or unwilling to communicate about staff pay.

Read more on the importance of communication:

“Employers may be missing an opportunity by not explaining to staff what values and behaviours are rewarded. Our survey finds that 76 per cent of staff report that they’ve not been told what they need to do in order to receive a pay rise this year.”

Overall, when an explanation was given, more employees were satisfied. 

As it stands, however, an increasing number of employees felt that their pay rises did not reflect their performance at work (23 per cent in 2014, compared to 19 per cent in 2013). The survey revealed that employees didn’t rate their employer’s ability to assess their performance very highly, nor do they think that their organisation is particularly good at rewarding or recognising it.

Cotton added: “Organisations could improve how they reward and praise individual and team achievements as well as how they manage and develop performance. The challenge for employers is to connect investments in increasing staff pay with what the business really needs. 

“Without this direction, many will struggle to see a step-change in business performance and could face wider issues with recruitment and retention if employees think they can achieve a higher salary elsewhere.”

Image source