Thaw in Salaries May be Paid For in Job Cuts
The long winter of pay and bonus stagnation is set to lift according to two reports from the CIPD and CMI, but the trade-off may be increased redundancies to pay for it.
The CIPD annual Reward Survey found 53 per cent of the 800 respondents expected salary spend to increase in 2010, while 15 per cent said it would shrink and 21 per cent said it would stay level.
The response towards bonus packages was positive, but there was an increased focus on aligning reward with business strategy and making it internally fair.
CIPD reward adviser Charles Cotton told BNET UK that this did not necessarily mean the pre-crunch bonus culture was coming back and employees could not expect big payouts regardless of their impact on the business.
Key performers would do well, which leaves the question of whether employees who are not stars, but nonetheless are critical in keeping the company afloat, will be left out. Cotton advised it was essential these employees' efforts were recognised in their basic pay.
Interestingly, respondents in the public sector also expected to see pay rise. Cotton said this is not over-optimism. Huge cuts in the public sector are coming, but some areas may not suffer them until 2011.
The CMI 2010 National Management Salary Survey found pay rising by an average 2.5 per cent across the UK over the last 12 months. But, this increase was not enough to stop the number of people moving on increasing. Reasons cited for the increased desire to jump ship were increased job insecurity and lack of career opportunities in the present company. Nearly two thirds of the 197 organisations surveyed said their employees had been targeted by head-hunters and recruitment consultants, indicating the economic climate has thawed enough for people to start considering a career move.
CIPD's Cotton sounded a word of caution though. Expectations of salary increases will hold businesses a hostage to continued economic recovery.
He said: "There is a cause for concern over how companies will be able to manage employees expectations if the economy doesn't expand in 2010. In 2009, inflation was low, so employees weren't worse off in real terms if pay stayed flat. This year, inflation is expected to rise which will impact earnings in real terms if salaries don't rise with it. It may be less important to save jobs than to keep employees earnings in line with the rising cost of living."