Ken Mulkearn | 03 Sep 2020

Slowdown produces variety of outcomes

The finding that emerges most clearly from our latest research – on both the latest pay outcomes and employers’ intentions for 2021 – is that while the recession associated with the coronavirus has begun to affect pay reviews, it is still the case that results are relatively widely distributed. The spectrum runs from pay freezes, which are now more common than previously, to rises of 3% or over, which nevertheless persist at a time when inflation is at low levels.

And when it comes to 2021, a greater proportion of employers (than in the previous survey) tell us that pay increases will be lower than this year, as might be expected, but over half state they will be either the same (the majority of these) or greater – with the proportion of those reporting a potentially larger pay rise showing a small increase on last year’s survey.

Why is this the case? The obvious answer is that different organisations have been affected in different ways by the pandemic and its attendant economic impacts. Some companies have had to make savings in the face of a reduction in business. Others, meanwhile, have seen increased activity and this has allowed them to raise pay by more than average or to make extra payments to reflect the additional effort being made by employees in challenging circumstances. We don’t know how long the economic effects of the pandemic will last, but we will continue to monitor and report on them as they impact on reward decisions.

Restructuring

One of the considerations guiding our work is that the pandemic has led to many firms reshaping their activities. For example, retailers are placing more emphasis on deliveries than previously. This is altering internal and external labour markets and could lead to new approaches to pay and conditions. Online marketing has become more important in many areas and this has placed a premium on data science and digital roles in particular.  

But the coronavirus outbreak has also made for a much deeper recession than might otherwise have been the case. As a result, the economy is likely to see wider restructuring as some firms grow, others close and new companies emerge. Certain jobs will be more difficult to recruit and retain while others will be easier, especially if unemployment rises.

What will a post-pandemic labour market look like? The ‘gig economy’ has been under pressure from a series of legal rulings that could force its main players to reclassify their ‘contractors’ as employees, with all the rights that entails. Agency and temporary work have also been under the spotlight during the health crisis as staff on a variety of short-term contracts were the first to be let go at companies hit by the downturn. And the number of people on zero-hours contracts is now over a million.

While the Government has yet to react to calls for measures that ameliorate the job losses that could accompany the phasing-out of its Coronavirus Job Retention Scheme, it has announced extra incentives for employers who wish to take on apprentices and young workers, and these could become more important in a variety of areas.

The worldwide protests over the killing of George Floyd in the US have most likely heightened the possibility of some sort of legislation on ethnicity pay gap reporting here in Britain. Our survey of employers’ reward plans for 2021 highlights that a significant minority of firms have already taken steps to calculate and report on their pay gaps in this area, and this proportion is likely to grow.

RPI debate

Finally, our survey also highlights the persistence of the use of the RPI as a measure of inflation for pay-setting purposes, despite the Office for Statistics Regulation de-designating it as a ‘national statistic’ (though the Office for National Statistics continues to publish figures for it). The consultation on the future of the RPI closed recently, with a Government response due in the autumn. Readers may be less familiar with the fact that the terms of the consultation were the subject of a debate hosted by the Royal Statistical Society on 21 July. Anyone interested in the proceedings can find them here:

https://rss.org.uk/news-publication/news-publications/2020/general-news/rss-open-meeting-on-rpi-–-event-report/