Research reveals that UK companies are going against best practice in delivering compensation programmes by not differentiating pay sufficiently for top performers. From Tom Hellier, GB Rewards practice lead for Willis Towers Watson.

The research identifies a clear opportunity for companies to better allocate available resources in order to attract, motivate and retain their best employees as market conditions create increased competition for talent.

While salary remains the number one consideration for workers in the UK when deciding to join or stay with a company, the research shows that employers are falling short in how they deliver pay programmes, including base pay and bonuses.

The 2016 Willis Towers Watson Global Workforce Study indicates that there is room for improvement in the delivery of rewards: Only a minority of workers in the UK (37%) see a clear link between their pay and performance. Under half (40%) feel that their manager makes fair decisions on how their performance links to pay decisions. Just 46% of employees say their company does a good job explaining its pay programmes.

Tom Hellier, GB Rewards practice lead for Willis Towers Watson, said: “The most recent pay data points to no significant wage growth in the last year. Without the current flexibility to expand the pay pot, employers are missing a trick by not using the resources they do have when it comes to rewarding employees more strategically. Instead, they seem to be spreading what they have more evenly than ever in an attempt to keep everyone happy, rather than rewarding their best performers for going the extra mile.”

Meanwhile, employers give themselves middle-of-the-road ratings on their effectiveness in delivering pay programmes. According to the 2016 Willis Towers Watson Talent Management and Rewards Survey: Only just over half (54%) of UK employers believe employees understand how their base pay is determined; just 58% of UK companies said employee performance was fairly reflected in pay decisions. Only a third (36%) of UK employers think their base pay programme is well executed.

In a separate report on salary budget planning, Willis Towers Watson Data Services confirmed pay growth will reduce in 2017. Iain Nichols, Head of Towers Watson’s Data Services GB said: “Our latest salary budget figures show that while real pay growth is declining in the UK, employers are likely to have their hands tied for pay review budgets for a while yet. So, they should be targeting their spend on high-performing employees as their European peers are already doing. It is important for companies to get this right as pay will always be a key weapon in the war on talent.”