Pay budgets expected to increase

More than half of employers expect their pay budgets will have increased by the end of the year, according to new research.

The CIPD's annual Reward Management Survey 2013 reveals that 53% of companies predict their pay budgets will shoot up, while many would like to see variable pay, such as bonuses linked to individual or company performance, play a greater role in total pay packages.

Findings from the poll show that respondents are confident about increasing wages and taking on more staff before the end of the year, with pay rises (84%) and rise in staff numbers (51%) found to be the two main drivers for increased pay budgets.

Meanwhile, total spend on benefits budgets also look likely to rise in 2013, with 34% of private sector employers forecasting an increase but only 15% in the public sector.

At present, 26% of organisations report that variable pay represents between 20% and 30% of total pay. However, in an ideal world, 38% would like such a split.

Some 45% of private sector service firms would like to see this ratio of variable pay in future, compared to the current reality of just 30%.

Charles Cotton, rewards adviser at the CIPD, said the issue of employee remuneration is "high on the agenda" in the workplace.

"It's encouraging to see employers wanting a more flexible way of rewarding their employees, in an effort to help align pay with the delivery of business strategy, but it's crucial to ensure that measures of performance look to the long term so that they encourage sustainable business growth," he added.

Key findings from the survey include:

Private sector companies (57%) are the most likely to report an increase in total spend, while those in the public sector are the least likely (35%). The public sector is also the most likely to predict a decrease in spend (27%).

Some 88% of manufacturing and production firms in the private sector are likely to link pay with individual performance for part or all of their staff, compared to 86% of service sector employers and just over 45% of public sector employers. Instead, the latter are more likely to link it to length of service (60%).

Companies employing more staff (58%) and introduction of auto-enrolment (47%) are key drivers that are increasing benefits spend. Meanwhile, pensions are among the most valued benefits by employees.

Copyright Press Association 2013