UK companies are going against best practice in delivering compensation programmes by not sufficiently differentiating pay for top performers

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Research from Willis Towers Watson has found that UK companies are not taking losing out on a clear opportunity to better allocate available resources in order to attract, motivate and retain their best employees as conditions in the market intensify competition for talent.

Salary remains at the top of the list for workers in the UK when they decide to join or stay with a company. Even with this in mind, the 2016 Willis Towers Watson Global Workforce Study found that employers are still falling short in how they deliver pay programmes, including base pay and bonuses.

  • Only a minority of workers in the UK (37%) see a clear link between their pay and performance.
  • Under half (40%) feel that their manager makes fair decisions on how their performance links to pay decisions.
  • Just 46% of employees say their company does a good job explaining its pay programmes.

Tom Hellier, GB Rewards practice lead for Willis Towers Watson, said: “The most recent pay data points to no significant wage growth in the last year. Without the current flexibility to expand the pay pot, employers are missing a trick by not using the resources they do 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.”

Employers do seem to recognise that they need to do more to effectively deliver their pay programmes, with only a third (36%) of UK employers believing their base pay programme is well executed. According to the 2016 Willis Towers Watson Talent Management and Rewards Survey, just 58% of employers said employees’ performance was fairly reflected in pay decisions and just 54% believed employees understand how their base pay is determined. Which shows a clear breakdown in communication for some UK firms.

Iain Nichols, Head of Towers Watson’s Data Services GB adds: “Our latest salary budget figures show that while real pay growth is declining in the UK, employers are likely to have their hands tied for pay review budgets for a while yet. So, they should be targeting their spend on high-performing employees as their European peers are already doing. It is important for companies to get this right as pay will always be a key weapon in the war on talent.”