New research by HR and payroll software provider CIPHR suggests that over two-thirds of workers think their most recent pay rise was unfair and didn’t reflect their job performance. Despite this, only one in nine (11%) are actively job hunting and interviewing for a new role.
A study*, based on a survey of over 1,000 employed British adults, reveals that 64% of people think that their last raise wasn’t fair, 70% that it wasn’t reflective of their work, and 59% that it wasn’t in line with the market rate for their role.
A significant majority (78%) also share the view that their salary increase doesn’t match the rising cost of living in the UK, with higher inflation causing real wages to fall over time.
Half of all respondents (45% of men and 53% of women) report not having received a pay rise for 2022. Although that doesn’t mean they won’t receive one in the coming months, as 23% of respondents say they haven’t received a pay rise yet but do expect to. For those that have received a recent pay rise, 10% say that their pay increase was below the rate of inflation (currently 5.5%), 13% that it was in line with inflation, and just 4% say that it was above the rate of inflation. Four times as many men than women reportedly received an inflation-beating wage hike (8% compared to 2%).
Looking at the results, there is a clear correlation between an employee’s thoughts about their recent salary increase and the purported likelihood of them leaving their employer. Staff who are dissatisfied with their pay rise – for whatever reason (including feelings of unfairness or concerns about not being paid in relation to their job performance or the market rate) – are more likely to admit that they intend to change jobs or are already in the throes of doing so.
Over two-fifths (44%) of respondents who believe that their last pay rise was unfair say it’s likely or very likely that they will change employer within the next year, compared to just 25% of people who believe that their last pay rise was fair.
Similarly, 40% of people who think that their last pay rise wasn’t truly reflective of their recent job performance say they intend to quit. In comparison, only 29% of people who think that their pay rise was on par with their performance are planning to do the same.
The majority (63%) of workers, however, are likely to stay put. Over two-fifths (42%) say they are not planning to move jobs but are open to it, while one in five (21%) say they are happy to stay in their current role – at least for the next year.
It wouldn’t take too much to change their minds though, as 79% of the people who say they aren’t planning to switch jobs this year would only need to be offered a 10% to 14% pay rise by a recruiter to consider a similar role at a different firm. A third (32%) would hold out for a salary increase of at least 20% or more.
The risk for employers is that one in five (21%) employees, on average, have been approached by a recruiter or head-hunter in the past three months.
Interestingly, a separate survey to 332 British employers on the same topic reveals that nearly two-thirds (63%) of organisations have (or are planning to) award their staff a pay increase for 2022 that’s in line with, or above, the rate of inflation. Which suggests that employees may receive more of a pay rise than they expect in the year ahead.
There is a distinct disconnect though between how employees and employers perceive how their pay rise is determined, which could explain perhaps why so many employees don’t often agree with the increment they receive.
Based on the findings of CIPHR’s employer survey, an employee’s job performance tops the list of factors that organisations base their salary reviews on. Nearly half (45%) of employers selected it as a key determiner of pay rises. And yet, only 30% of employees, on average, felt that their latest pay rise was a true reflection of their job performance.
Other factors that employers reportedly take into consideration include cost of living (37%), an employee’s potential (36%), the market rates for job roles (36%), and an employee’s flight risk (21%).
Less than a fifth (17%) of organisations admit to being transparent with their workforce about how pay rises are determined. Most fall somewhere in the middle ground, with nearly half (44%) of employers saying that their staff are aware to some extent of the different factors that influence whether they will be awarded a pay rise, and how much that pay rise will be. Nearly a quarter (23%) say that their staff are aware to a great extent, while one in six (16%) acknowledge that their employees are not aware how pay rises are determined at all.
Commenting on the results, Claire Williams, chief people officer at CIPHR, says: “Transparency around pay and reward processes and policies is important for ensuring a fair and equitable approach to pay and to ensure valid business reasons for any variances in pay. From an employee’s point of view, transparency around salary grades or pay banding structures helps to provide clarity around expectations of earnings.
“There’s no denying that people’s perception of their own value in the workplace is closely linked to the financial package they receive and employees want to feel financially rewarded for the skills and experience that they bring to an organisation. This has obvious implications for employers. Workers that feel undervalued or underpaid can have a negative impact on productivity, employee engagement, job satisfaction, morale and so much more. It’s not all about pay, however, and organisations need to think carefully about the entire employee experience, including career and development opportunities, wider benefits and health support, management capability, and so on. No matter what you do around pay, if a holistic approach isn’t taken to your overall employment value proposition you’re likely to lose more staff in the long run.”
Williams adds: “Generally speaking, good employers do recognise hard work, high performance, and potential but they aren’t always able (especially in the current economic environment) to match employees’ salary expectations and increase wages as much as some employees might like them to. Salary should always be considered within the context of an individual’s total reward package. So, while employers might not be able to match spiralling inflation, they can perhaps look to increase other discretionary benefits and incentives, which may help mitigate feelings of unfairness and increased turnover.”