Ken Mulkearn | 23 Mar 2021

Reward landscape might be about to become more interesting

The ongoing pandemic is making all sorts of aspects of daily life more complicated, and reward is no exception.

Our latest pay settlement analysis shows the definitive impact of the health crisis and the associated economic slowdown on pay review outcomes, with a much sharper fall in the median than when the first wave crashed upon these islands a year ago. 

In large measure this is because of the timing of pay reviews. Since these largely take place in January, to some extent, and April, to the greatest extent, most decisions at the time of the initial outbreak in March 2020 had already been made, and so the impact on pay awards was more muted than it might have been. Now we’re embarking on a new pay round, but the virus is still circulating and affecting economic activity, and the effects are clear to see.

Downward pressures on pay are therefore pre-eminent. But it’s important to remember that the economy is a competitive market one, and as such, not all companies are finding it difficult to make money. In fact, some are doing fine or even better, and this is reflected in the persistence of pay rises above the median level. Examples in our most recent issue of Pay Climate include BMW Oxford, Cummins and Tarmac Trading.

These companies may be among those who will be asked to share the burden of shoring up public finances in Wednesday’s Budget with the likelihood of a rise in corporation tax being trailed. The Budget is also likely to see continued Government support for both business and workers, in the form of continued business rates relief on the one hand and the job retention or ‘furlough’ scheme on the other hand, as well as a likely extension of the lower VAT rate for hospitality firms and continued grants for those businesses worst affected. Meanwhile unions will be hoping for increased support for those who have to self-isolate.

Whatever happens with the Budget, the global pandemic has produced a reordering of previous labour market priorities. It has turbo-charged changes connected to the digital communications revolution and made homeworking commonplace, something that has meant work has been able to continue in many parts of the economy. And while automation has reduced the numbers of humans that are required to be involved in crucial activities such as agriculture and shipping – thereby allowing these also to be carried on more or less untouched – at the same time the pandemic has boosted the status of groups like refuse workers, supermarket cashiers and delivery drivers. 

The court judgement in the case of minicab firm Uber is relevant to some of these cohorts, and also to other groups such as home care workers. In short, it means that employers can no longer insist that such people are mere ‘contractors’ with no employment rights, but instead are classified as ‘workers’ who must be paid at least the minimum wage and holiday pay as well. As such, the ruling represents a serious blow to the so-called gig economy, though perhaps the main players are down rather than out, with any change that would permanently benefit workers requiring legislation. 

All of this highlights the prospect of complex and seemingly paradoxical developments as a result of the pandemic. I’ve written previously about the virus making risk a part of jobs that previously wouldn’t be regarded as dangerous at all, and how this means that managements have to rely more on workers’ goodwill than before. This could alter the landscape for employment relations within firms in unforeseen ways. For instance, it could spell the end for such practices as insisting on quotas for each possible outcome, including no rise, under performance-related pay schemes. Clearly, labelling some workers as losers, as these schemes do, isn’t going to motivate them or their colleagues, and when employers need workers to give their best in altered circumstances, this type of approach doesn’t seem to fit the bill. This is already happening in Wales with teachers, another group whose importance has increased, as the new review body there reverses the performance-related progression that still pertains in England, though for how long now? 

A final comment relates to benefits, an area which – in an era that has witnessed the shrinking scope of unions and collective bargaining, at least outside of larger organisations – is characterised by moves to tailor these awards to individuals. While sometimes this can be superficial – since many benefits in allegedly flexible schemes are essentially the same across workforces – the point is that the promise of increasing individualisation has led employees to seek that they be treated as such. Recognising the individual humanity of every member of their workforces is something that employers have long paid lip service to, but my prediction is that employers will increasingly have to grapple with this in real time and show how they are in fact doing so.