Only a third of workers see a clear link between their pay and performance

Employers urged to ‘reward the right behaviours’ ahead of challenging times

Only a third (37 per cent) of employees see a clear link between their pay and performance, research published today has found, raising concerns that workers could become disgruntled as wages remain squeezed.

The Willis Towers Watson Global Workforce Study, which gathered responses from more than 36,000 employees across a range of industries, also revealed that only two in five (40 per cent) employees felt their managers made fair decisions linking performance to pay. Less than half (46 per cent) said their organisation clearly explained its reward programmes.

Willis Towers Watson also surveyed 2,004 companies worldwide and discovered that only 58 per cent of UK companies thought employee performance was being fairly reflected in pay decisions.

“The most recent pay data points to no significant wage growth in the last year,” said Tom Hellier, GB rewards practice lead at Willis Towers Watson. “Without the current flexibility to expand the pay pot, employers are missing a trick by not using the resources they have when it comes to rewarding employees more strategically. Instead, they seem to be spreading what they have more evenly than ever in an attempt to keep everyone happy, rather than rewarding their best performers for going the extra mile.”

The findings follow various warnings that wages are becoming increasingly squeezed. The CIPD’s Labour Market Outlook, released last August, revealed that pay growth was anticipated to be just 1 per cent over the next 12 months, the lowest expectations have been in three-and-a-half years.

Meanwhile, Torsten Bell, director of think tank the Resolution Foundation, warned in June that real pay could soon hit its lowest point in two centuries, thanks to rising inflation and ongoing uncertainty surrounding Brexit.

“HR faces a challenging balancing act to manage or deal with little money, poor salary budgets and few incentives, but also to hold on to and attract talent in what will be a critical few years ahead,” Alastair Woods, partner for reward and employment at PwC, told People Management. “There is a bigger issue about performance management – currently a lot of effort and pain goes into differentiation and performance through ratings and core bonuses, for very little difference in money. I would encourage companies to look at different models of recognising great performance and creativity, investing in fluid feedback models and treating progression and talent in a holistic way, rather than over-emphasising the annual cycle.”

Charles Cotton, head of pay and reward at the CIPD, said that managers must become more strategic in rewarding good performance. “Linking pay to performance is only going to work if it rewards the right behaviours in the right way and at the right time – otherwise it’s simply going to rate or rank performance rather than raising it,” he said.

“If firms are going to be successful in today’s knowledge and innovation-based economy, they need to reward the behaviours that are needed for the future, not the past.”

The Office for National Statistics is scheduled to publish its latest data on the UK labour market on Wednesday, including estimates for changes in average weekly wages for June to August 2017.