Preparing for pay review 2025
28th August 2024
Julia Hanna
How pay benchmarking helps budget planning
As we move into budget planning season, many of our clients ask us to help build their case for the upcoming pay review. To many, it’s like walking on hot coals balancing employee expectations and employer caution.
So. here’s a few tips on things to think about and how pay benchmarking can help.
This year, the forecasts suggest we are on a downward trend, back towards a 3% pay review world:
- CIPD Labour market outlook (summer 2024) 3% for the private sector
- Willis Towers Watson (WTW) 4%
- World at Work 4%
- Trading Economics 2.5%
But, of course, that’s just what other organisations are predicting they will do.
To come up with a meaningful budget proposal we need to consider much more:
The wider economy: unemployment is down (4.2%), UK growth is predicted around 2% and inflation is currently 2.2% (forecasted to drop below the 2% target in 2025).
Our business aims: is the organisation looking to grow or consolidate, and what are the people implications?
Our talent market: Although 31% of employers are still planning to hire, job vacancies continue their downward trend. What’s happening in our sector?
And of course, if we compete for talent in the public sector, don’t forget that the Government has just approved pay awards of 4.75% – 6% that are unlikely to show in the figures above.
Our employee population: how the changes to the National Living Wage outlined in Sam’s earlier blog will impact our wage spend either directly or through trickling up.
Our pay equity position: do we need to make any adjustments to pay because of equal pay or pay gap analysis?
Our hotspots: with 20% of employers anticipating significant problems filling roles, and 37% of employers reporting hard to fill vacancies (most acute in the public sector), we need to know how the salary market is responding. Are some roles starting to demand a premium or are we lagging behind the market?
In short, do we need to invest more (or less) than the forecasters predict to deliver on our reward agenda?
With continued geopolitical uncertainties, and the pandemic and cost of living crises still ringing in our ears, many employers are going to be cautious.
So, it’s even more important to build the budget based upon defendable data. That’s where salary benchmarking comes in. It provides:
- a snapshot of the market
- data to build your budgets
- insight for individual pay awards
- clarity on those ‘hot jobs’
- indications on where to target limited funds
Salary benchmarking isn’t the end, it’s the means. It provides the foundations for informed decision-making. Use it in conjunction with an understanding of your financial constraints and your desired competitive positioning to help build a credible budget proposal.
For many, the rigorous and statistical approach required for benchmarking is too time-consuming or doesn’t play to their strengths. At Verditer, our salary benchmarking service provides a specialist to partner with through the process.
We make it easy and simple for you so that you can focus on the decision-making.
How we can help
If you’d like help with pay benchmarking, or your pay and reward strategy, please do get in touch for an initial conversation.
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