‘Reward strategies should focus on the living wage and greater pay transparency’

Employers should refocus their reward strategies around six key areas, from offering a real living wage, wellbeing and financial support and re-establishing internal pay and career progression rather than paying new staff higher awards, according to a new report.

The report from the Institute of Employment suggests that ‘total reward’ offers commonly publicised by employers, and the recent recovery in average pay awards, do not reflect the economic reality experienced by the majority of UK employees.

In addition to a real living wage for the lowest paid staff,  internal pay and career progression and mental health and financial support, the report says employers should focus on:

• Aligning pay and reward policies with wider HR, talent and diversity management practices.
• Greater joining up of government and employer policies, for example in ensuring that ‘work pays’ for those receiving Universal Credit.
• Linking reward policies for staff at the top and bottom of organisations, establishing fair and appropriate pay differentials so that all employees can share in the financial benefits of an organisation’s success.

The paper highlights growing insecurity and real-pay declines in the past decade for many in the UK workforce, as pay differentials have widened and gender, ethnicity and disability gaps remained widespread, prompting government intervention. These factors have, in turn, contributed to rises in stress and mental ill health and poor levels of employee engagement levels, says the report.

It adds that the success of true total reward policies depends on how employees perceive and receive them, not on what employers promote, provide or ‘push’ onto them.

IES head of HR Consultancy and author of the study, Dr Duncan Brown, said: “Employee engagement, and associated high performance, through total rewards is dependent on how employees feel about working for the organisation. Organisational performance and national productivity will only improve if employees see a genuinely more rewarding future for themselves and their families ahead.

“Despite recent interest in the “employee experience”, this needs to become more than another vapid HR programme label and reflect the real-life perceptions of employees. Too many reward and benefits packages fail to address underlying issues of poverty and inequality in the wider economy, and poor levels of employee engagement and workplace experience across many organisations.”

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