Most employees have never had their pay explained to them

HR needs to communicate reward structures and decisions more effectively, CIPD report finds

The majority of UK employees have never had their line manager explain to them why they receive the pay they do, a CIPD survey has found, leading to calls for greater transparency from organisations over reward processes and outcomes.

The 2019 CIPD Reward management report, which polled 2,031 employees and 465 HR professionals, found that 60 per cent of employees had never had their pay explained to them.

The report said perceptions of unfair pay were being driven by employers’ poor communication, and described the lack of line manager involvement as a “missed opportunity”.

Only half of the permanent employees surveyed (51 per cent) thought they were being paid fairly, and just 34 per cent thought everyone in their organisation was paid fairly.

Charles Cotton, senior reward and performance adviser at the CIPD, said the results were “concerning”, and provoked questions around transparency and organisational culture. “Failure to be transparent about pay can make staff feel they are being kept in the dark and feed a perception of unfairness,” he said.

“The most important part of the report from an employer perspective is the issue of transparency on pay decisions, in terms of how salary levels are set and how people progress along the pay structure,” said Cotton, adding there was a “real opportunity” for organisations to do more to communicate their pay policies so staff understood how decisions were made.

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But Cotton added that communication was only part of the story and wouldn’t ensure people were paid fairly in the first place. “Continued scrutiny over executive pay and gender pay gap reporting shows this is still an issue that many organisations are wrestling with, so businesses need to be on the front foot when it comes to understanding and assessing pay,” he said.

Alison Gill, chief executive of corporate governance consultancy Bvalco, said most people wanted to be rewarded fairly for the work they did and transparency helped employees judge fairness for themselves. “Fairness is a component of both respect and trust. We have a crisis of trust in business, and transparency will help resolve this crisis,” she said.

The report also called for HR departments to offer greater support to line managers making pay and bonus decisions. Of the organisations where line managers were given responsibility over remuneration, the poll found that 62 per cent had not assessed the effectiveness of their managers in setting pay.

One in five (20 per cent) employers also admitted giving no support at all to line managers in making decisions over pay.

Employers were not carrying out regular pay audits, said the report, despite a requirement for medium and large employers to conduct them regularly. Just 39 per cent had carried out an equal pay audit in the past three years to ensure they were complying with the law. 

Organisations also need a clear definition of fairness that covers both pay processes and outcomes, the report said, and this should be developed with input from staff on what fair pay means to them. Less than a third (30 per cent) of employers had a definition of what fair pay meant within their organisation.