Zoe Woolacott | 08 Apr 2020

Half of employers honour 2020 pay awards despite the pandemic

Just over half of organisations who had already made a decision on their 2020 pay award will honour the agreed increase for workers, according to the results of our survey of pay decisions and furlough arrangements. Of the remainder, 27% have deferred their pay award until later this year while 22% have decided to freeze pay. The decisions to freeze pay are largely a result of the economic impact of COVID-19 with some companies applying these to all workers, while others are only freezing managers’ pay.

Most firms honouring pay reviews are in the private sector, particularly engineering and financial services, as well as the energy and water sector. However, a number of organisations in the not-for-profit sector also intend to honour previous pay decisions, especially those firms offering key support with care services or housing. Deferrals and freezes are spread across all sectors.

Around three-quarters of the awards taking place are effective from 1 April 2020. April is a key month for pay setting with nearly half of all awards across the economy usually taking place at this time. Some pay awards will be affected by changes to the National Living Wage, which rose by 6.2% on 1 April 2020 to £8.72, though some employers may defer these increases for furloughed employees who are not working under the Government's Coronavirus Job Retention Scheme (CJRS). Find out more here in our recent article how-does-the-coronavirus-job-retention-scheme-work?.

Long-term pay deals

All participants in our survey whose 2020 award is part of a long-term pay deal told us that these increases will continue as planned. Over 1 million employees working for NHS England were awarded a pay rise of 1.7% on 1 April 2020 in the third year of a 3-year pay restructuring deal. Wider workforce/HR discussions are taking place in the NHS on COVID-19 but at the moment no additional pay elements are being implemented.

Furloughed workers

The most common response to the Covid-19 pandemic by employers in our survey is to give staff time off on full pay, with some 41% of respondents reporting that some or all staff are furloughed on full pay. This indicates that a large proportion of employers are opting to top up the wages paid to furloughed staff on the CJRS, under which the Government has committed to pay 80% of the wages of affected staff.

The next most common measures are either to reduce staff hours or to furlough employees on reduced pay, both at 15% in our sample. However, these approaches could become more widespread. On asking employers what measures were being planned, these were the most-commonly cited options currently being considered.

Several employers have implemented direct changes to pay, either by implementing temporary pay cuts (11%) or by awarding additional payments to staff (6%). Pay cuts feature in what might be considered the worst affected sectors where social distancing measures mean sites are closed, for example, hospitality, air transport, and construction, but also includes other services where coronavirus has resulted in a significant and abrupt downturn in demand.

Those making additional payments to staff in recognition for increased duties and responsibilities are in areas of the economy that are critical to the effort to limit the spread of the virus, such as food manufacture, social care, utilities and local government. These payments have taken the form of a bonus, honorarium payment and attendance payment, examples include bonuses of 15% at a social housing organisation.

Both these responses are likely to become more common, with more pay cuts on the one hand and more additional payments on the other: 12% and 13% of employers respectively reported that these measures are currently under consideration.

Meanwhile a few employers have enforced holiday as a means of managing reduced workloads.

Redundancies avoided so far

Most respondents have managed to avoid making staff redundant so far with 92% reporting that there are currently no plans for redundancies. Of the three organisations that have made staff redundant, one reports that the decision only affected newly-recruited staff before their first day of employment, and a further two organisations that made staff redundant in March have since reinstated them under the CJRS scheme.

As intended, the CJRS scheme may help firms avoid redundancies, with 37% of respondents indicating that they intend to make use of it. A further 39% are ‘not sure’, while just 24% said they have no intention of using the scheme (half of which are in the public sector). 

However, a number of employers expressed concerns about the scheme. These include how businesses will cope if non-furloughed staff fall ill remain, and concerns over the build-up of annual leave. Furloughed workers will continue to accrue holiday. Therefore many firms are hoping that business will bounce back once a return to work becomes possible and are unlikely to want a high number of employees requesting leave at that point, or carrying it over into 2021. Many employers are likely to insist that staff take leave already booked, at least, and they might be expected to be proactive about asking staff to let them know when they might take their remaining leave.

We will publish a detailed analysis of the survey findings in the next issue of Pay_Climate.

About the survey

IDR conducted a survey of HR professionals between 25 March and 6 April 2020. The survey received 76 responses from mostly large private-sector firms employing nearly half a million workers in total.

Participants

2 Sisters Food Group, Affinity Water, Ageas Insurance, Air Products, Altro, Archaeoleg Brython Archaeology CYF, Arconic Manufacturing, Associated British Ports, AWE, Beamans, Bombardier Transportation, British Pepper and Spice Company, Bracknell Forest Council, Cancer Research UK, Chartered Institute for Securities and Investment, CNH Industrial, Co-operative Group, Dounreay Site Restoration, East Riding of Yorkshire Council, Epson, Experian, Fenner Dunlop, Financial Ombudsman Service, Green Apple Catering, Guinness Partnership, H&R ChemPharm UK, Heathrow Airport, Hinckley and Bosworth Borough Council, Hitachi Automotive Systems UK, Irwin Mitchell LLP, Jacobs Engineering, John Wiley and Sons, KCA Deutag, Keith Carter and Associates, Kensington Mortgage Company, Kier, Lloyds Banking Group, Leeds Building Society, London Borough of Brent, Lubrizol UK, Luton Borough Council, Magna Vitae, Midland Heart, Mitsubishi Chemicals Advanced Materials, Nando's, National Grid, Nationwide Building Society, Nuneaton and Bedworth Borough Council, Penfro Peche, Pinnacle Group, Plessey, PQ Silicas, Primark, Rambus, Royal Borough of Windsor and Maidenhead, Scottish and Southern Energy, Services For Education, Shakespeare Birthplace Trust, Siemens, Sue Ryder, Surrey County Council, Tameside Council, Tarmac Trading, Trusted Financial Advice, The Crown Estate, Universities and Colleges Employers Association, Uniper, University of Birmingham, Valuation Office Agency, Vision Homes Association, Warwickshire Police, Whitbread, Yarlington Housing Group and Yorkshire Water.

Future research

If you would like to help with our research then please tell us about any pay increase or pay freeze by emailing us at IDRteam@incomesdataresearch.co.uk or by using our online survey below.