News
October 2011 – Pay and Benefits Bulletin
Time to move abroad?
We at CELRE Consultancy are a UK-centric operation but we couldn’t help noticing a recent report from Mercers that executive pay in Asia was outstripping that in Europe and is set to overtake the USA within 3 years. Given all the talk of “emerging economies”, most notably China and India, this should really come as not a great surprise. However average executive pay rises in those countries of 7%, compared to 2.5% in the UK give a marked measure of difference. NB however that in Japan, with its struggling economy, pay levels remain firmly below those in the West.
Here in the UK Randstad’s annual “World of Work” research paints a gloomy picture that over 35% of employees surveyed would take a new job to escape from their present employment where they are having to work exceedingly hard for limited reward, thanks to the economic recession. Uncompetitive remuneration features as one of the top 3 reasons why they would wish to leave their current employer.
As if that wasn’t enough, the Institution of Mechanical Engineers reports a serious shortfall in the number of engineering graduates – only 12,000 graduating each year where 31,000 are needed to meet industry demands.
Failure by organisations to do their best to maintain competitive pay levels for their key roles could prove to be a serious strategic error going forward.
It is worth remembering however that in the latest Reward Management Survey published by the CIPD they report that market positioning of pay is becoming more common again, as was the case before the recession. Over half of respondents to their survey were looking to position their pay at market midpoint and they regard market rates as the most important factor in determining pay levels. Ensuring that reward is market competitive therefore is one of the key reward priorities for these organisations in 2011 and going forward.
A supporting consideration to this is the question of how often should you review your pay arrangements to ensure that they remain market competitive? We would recommend that an annual review should be carried out or at the very least once every 2 years.
If you need assistance in the market positioning of your pay levels we at CELRE Consultancy are ideally placed to help you. Do you know where you stand in pay terms compared to the market? If not, let us help you.
Economics
This year’s pay reviews have been taking place against a background of mixed economic indicators. Inflation has seen a period of volatility unprecedented in recent times moving from negative territory in late 2009, to peak at 5.3% in April 2010. Having initially fallen back, February 2011 saw a continuation of January’s climb to 5.5%, followed by a fall in June and July to 5.0%, but rising in August to 5.3% and then to no less than 5.6% in September. The general consensus still remains that RPI will fall during the remainder of this year although present indicators would suggest otherwise. The forecast of 5.3% for Q4 2011 may be a little optimistic at this point, but RPI is forecast to fall during 2012. This is key, as most negotiators will seek to focus on the forecast RPI, rather than its current level when settling pay awards.
Pay Bargaining Stats – October 2011
Inflation
Retail prices index (RPI): 5.6% (September 2011)
Next release date: 15 November 2011.
Retail prices index excluding mortgage interest payments (RPIX): 5.7% (September 2011)
Next release date: 15 November 2011.
Consumer prices index (CPI): 5.2% (September 2011)
Next release date: 15 Novemberber 2011.
Q4 2011: 5.3%; Q1 2012: 4.2%
Next release date: 18 November 2011.
Pay Settlements
The XpertHR measure of pay awards - the midpoint in the range of basic pay deals - stands at 2.0% in the three months to 30 September 2011, unchanged from the revised figure for the previous rolling quarter, according to the latest provisional analysis. The inter quartile range stands between nil and 3%.
Next release date: 18 November 2011.
Engineering and manufacturing (EEF)
Average settlements for three months ending 30 September 2011: 2.5%
Next release date: 18 November 2011.
Manufacturing and services (LRD)
Median settlement levels for three months ending 31 August 2011: 2.5% (manufacturing); 2.3% (services)
Next release date: 18 November 2011.
