A recent survey by WTW, a global advisory and solutions firm, reveals a noticeable disconnect between employers’ pay programmes and employee expectations.
The 2024 Pay Effectiveness and Design Survey indicates that while pay remains the most critical factor for attracting and retaining talent, only about half of global employers report they are meeting their key pay programme objectives effectively.
This survey highlights six core objectives related to pay programme effectiveness: driving employee attraction, driving retention, promoting fair and competitive compensation, aligning pay strategies with business goals, and rewarding employees for performance. Yet, only half of employers are successful in achieving two of these goals, and fewer than half are effective in the remaining four areas.
Research shows that 48 percent of employees identify pay as the main reason for both joining and staying with an employer. Moreover, over half of employees (56 percent) would consider switching jobs for better pay.
Pay Programmes and Market Realities
Labour market challenges, such as talent shortages, changing workforce demographics, and the rise of new work models, have put pressure on pay strategies. Socio-economic factors like the global pandemic and ongoing inflation have also influenced pay expectations, but many employers have struggled to keep pace with these changes.
Tom Helier, Senior Director of Work and Rewards at WTW, said, “Many organisations may not have been able to focus on key drivers of pay effectiveness over the past few years due to complex changes in the labour market. Now is the time to get your compensation strategy in order.”
One major issue affecting pay effectiveness is the lack of communication. According to the survey, fewer than one in four employers are effective at communicating how pay is determined. This lack of transparency is compounded by concerns around salary compression, with 58 percent of employers already identifying it as a problem, and a similar number expecting it to worsen in the coming years.
“As companies gear up for their annual pay review, now is the ideal time to reassess pay effectiveness,” Helier adds. “With evolving business dynamics and employee expectations, it’s crucial for organisations to ensure compensation strategies are not just competitive but aligned with broader business goals. This isn’t just about keeping up – it’s about staying ahead.”
Pay Rises Stalling in the UK
Pay increases in the UK are projected to decline and present further challenges for employee retention, according to recent data from HR data and insights provider Brightmine. Pay rises have plateaued at 4 percent for the current quarter and the 2025 Pay Forecast anticipates a further decline in pay awards, driven by concerns over business performance and affordability.
Brightmine’s data, which covers nearly half a million UK employees, shows that the median pay award forecast for the next 12 months is 3 percent, down from 4.7 percent in the previous 12 months and significantly lower than the median of 6 percent recorded in 2023. Despite these challenges, only a small minority of businesses (4 percent) are planning to implement pay freezes, indicating that many employers are still seeking to offer salary increases where possible, albeit at a lower rate.
Sheila Attwood, Brightmine senior content manager, data and HR insights, said, “With economic pressures mounting, we’re seeing organisations re-evaluate their pay strategies, and many are shifting their focus toward enhancing employee benefits as a way to balance employee expectations with the needs of the business.
“While pay awards are expected to decline in 2025, businesses are continuing to find creative ways to support their workforce, particularly by addressing skills shortages and retaining key talent. Where organisations are perhaps falling short of employee expectations in regard to pay awards, good communication about pay decisions can help to mitigate this.
“The next 12 months will require a careful balance between affordability and maintaining a competitive edge in employee engagement and retention.”
