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What do employees think about pay?

Mark Beatson, Chief EconomistCharles Cotton, Pay and reward adviser

Presentation to ONS Labour Market Statistics conferenceMarch 2014

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Contents

1. How important is pay to employees?2. How satisfied are employees with their pay?3. Do employees think they are paid fairly?4. What did employees think about their last pay rise?5. What do employees expect for the year ahead?6. International comparisons7. Conclusions

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1. How important is pay to employees?

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Importance of pay for decision to seek paid work(% of employees, GB)

1989 1997 20050%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Importance of high income in a job

Neither important nor unimportantImportantVery important

1996199819992000200120070%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Main reason for working

To earn money of my ownTo earn money to buy extrasNeed money for basic essentials

Source: British Social Attitudes Surveys.

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2. How satisfied are employees with their pay?

Employee descriptions of their pay(% of employees, GB)

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Very low A bit low Reasonable

Source: British Social Attitudes Surveys.

Employee satisfaction with pay(WERS, mean score, UK)

Private sector

Satisfaction with pay

Job security

Overall job satisfaction

0 1 2 3 4 5

2011 2004

Public sector

Satisfaction with pay

Job security

Overall job satisfaction

0 1 2 3 4 5

2011 2004

Source: van Wanrooy et al, ‘Employment relations in the shadow of the recession’.

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Employee satisfaction with pay(“Considering all my efforts and achievements in my job, I feel I get paid appropriately”,% employees, GB, 2010)

AllMale

Female15 to 2425 to 3435 to 4445 to 5455 to 64

Works full-timeWorks part-time

Not union memberUnion member

1st income decile2nd income decile3rd income decile4th income decile5th income decile6th income decile7th income decile8th income decile9th income decile

10th income decile

0% 10% 20% 30% 40% 50% 60% 70% 80%

Agree strongly Agree

Source: European Social Survey, 2010.

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3. Do employees think they are paid fairly?

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Justice and fairness of employees’ pay(% of employees, GB)

1999 20090%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

What I deserveLess than I deserveMuch less than I deserve

1999 20090%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

About fair for meLittle less than fairMuch less than fair

Source: British Social Attitudes Surveys.

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Pay equity at the workplace(views on gap between highest and lowest paid at the workplace, % of employees, GB)

1983

1985

1987

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

14%

31%

49%

Time series

Much too big Too big About right

15 to 24

35 to 44

55 to 64

Male

Degree

A-level or equivalent

CSE/GCSE D-G

Not a TU/SA member

Works full-time

Managers/professionals

Junior non-manual

Semi-skilled/personal services

High income

Low income

0% 10%

20%

30%

40%

50%

60%

Cross-section, 2009

Much too big Too big

Source: British Social Attitudes Surveys.

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Pay equity in society(% employees who agree ordinary people do not get their fair share of the nation’s wealth, GB)

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

14%

48%

26%

Agree strongly Agree Neither agree nor disagree

Source: British Social Attitudes Surveys.

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4. What did employees think about their last pay rise?

CIPD employee attitudes to pay surveys

• What – employer pay decisions; the basis of these choices; employee reactions to these decisions; and employee pay and bonus decision forecasts.

• When – research carried out between 19 December 2013 and 7 January 2014

• How – 2,683 working adults, across all industrial sectors, questioned via an online survey by YouGov

• Why – pay is a significant element of total costs, what is the ROI on that expenditure

Changes in the nominal pay of employees in the previous 12 months(% of employees, excluding don’t know/can’t remember responses)

2008 2009 2010 2011 2012 20130

10

20

30

40

50

60

70

80

90

100

3 5 4 5 3

26

42 45 4941

70

51 50 4651

Pay cut Pay freeze Pay increase

Respondents were instructed to exclude promotions, demotions, regrading and new jobs.Sources: CIPD Employee attitudes to pay surveys, 2008 to 2011 and CIPD Employee Outlook survey, winter 2013/14.

Pay rises in 2013

Private Public Voluntary All

Upper quartile 4.00% 1.00% 2.00% 3.00%Median 2.10% 1.00% 2.00% 2.00%Lower quartile 1.90% 1.00% 1.00% 1.00%Mean 4.48% 2.78% 2.55% 4.00%

Source: CIPD Employee Outlook survey, winter 2013/14.

Employee satisfaction with most recent pay outcome (% of employees, excluding don’t know/can’t remember responses)

Pay rise

Pay freeze

Pay cut

All

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

68%

24%

15%

47%

29%

69%

81%

48%

DissatisfiedSatisfied

Source: CIPD Employee Outlook survey, winter 2013/14.

Why employees were dissatisfied with pay outcome(% of employees dissatisfied)

Did not keep pace with increases in the cost of living/inflation.

Did not reflect how well I had performed at work.

Pay is below what I could get elsewhere for doing the same job.

Below the pay increase of senior management.

Did not reflect the state of the economy.

Did not reflect my experience.

0% 20% 40% 60% 80%

47%

32%

26%

14%

4%

16%

65%

19%

15%

12%

11%

9%

2013 (n=397)2012 (n=320)2011 (n=260)2010 (n=244)2009 (n=201)

Source: CIPD Employee Outlook survey, winter 2013/14.

Why employees were satisfied with pay outcome(% of employees satisfied)

Reflected the state of the economy.

Reflected how well I had performed at work.

More than I received last year*.

Pay is at or above what I could get elsewhere for doing the same job.

Kept pace with the cost of living/inflation.

Reflected how much money the organisation had to make a pay award.

Reflected my experience.

Did not discriminate against me.

0% 10% 20% 30% 40%

24%

24%

18%

31%

19%

12%

12%

21%

20%

20%

17%

14%

14%

8%

7%

19%

2013 (n=917)2012 (n=1,020)2011 (n=949)2010 (n=1,072)2009 (n=902)

Source: CIPD Employee Outlook survey, winter 2013/14.

Employee satisfaction with pay outcome depends on the quality of communication(% of employees, excluding don’t know/can’t remember responses)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

74%

58%

36%

15%19%

25%

39%

63%

80% 78%Satisfied Dissatisfied

Source: CIPD Employee Outlook survey, winter 2013/14.

How many employers communicate?

• 51% of employees received an explanation over the pay decision made by their employer in 2013, down on the 62% in 2012.

Pay communications by sector, 2013Sector Increase Freeze Cut All

Private 55% 41% 55% 49%

Public 61% 50% 71% 56%

Voluntary 64% 30% 61% 61%

Source: CIPD Employee Outlook survey, winter 2013/14.

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5. What do employees expect for the year ahead?

Employees’ one year ahead pay predictions(% of employees)

2009 2010 2011 2012 20130%

10%

20%

30%

40%

50%

60%

70%

80%

67%

58% 58%55% 54%

25%

33% 32% 34% 34%

6% 7% 8% 9% 10%

Pay risePay freezePay cut

Sources: CIPD Employee attitudes to pay surveys, 2008 to 2012 and CIPD Employee Outlook survey, winter 2013/14.

Employee pay predictions for 2014

Private Public Voluntary All

Upper quartile 4.00% 2.00% 3.00% 3.00%Median 2.00% 1.00% 2.00% 2.00%Lower quartile 2.00% 1.00% 1.00% 1.00%Mean 4.02% 2.64% 2.73% 3.66%

Source: CIPD Employee Outlook survey, winter 2013/14.

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6. International comparisons

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Importance of a high income in choosing a job(% of employees, 2010)

Denmark

Switzerland

Sweden

Ireland

Germany

France

Slovakia

Slovenia

Israel

Norway

Ukraine

Greece

Poland

Cyprus

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Important Very important

Source: European Social Survey, 2010.

Perceptions of pay across Europe

Slovakia

Lithuania

Hungary

Poland

Slovenia

Israel

Portugal

France

Germany

Cyprus

Northern Ireland

Denmark

Ireland

Switzerland

0% 10% 20% 30% 40% 50% 60% 70%

57%57%

“Considering all my efforts and achievements in my job, I feel I get

paid appropriately” (% agree/strongly agree)

Hungary

Lithuania

Albania

Kosovo

Slovakia

Italy

France

Estonia

Slovenia

Montenegro

Finland

Spain

Germany

Austria

Ireland

Cyprus

Netherlands

Denmark

0 10 20 30 40 50 60 70

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“I am well paid for the work that I do?” (% agree)

Sources: Left panel: European Social Survey, 2010.; Right panel: European Working Conditions Survey, 2010.

Correlation of perceptions of pay with level of pay

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,0000%

10%

20%

30%

40%

50%

60%

70%

Mean annual earnings, 2010 (US$ 2012 PPP)

% agree pay is “fair”

UK

Sources: European Working Conditions Survey 2010 (perceptions of pay); OECD (average earnings).

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7. Conclusions

• Pay is the most important reason why most people work – though declining in importance?

• Pay is important for job choice• About half of employees satisfied with their pay – is this going

up?• Satisfaction with pay associated with relative pay levels• Satisfaction with recent pay rises has held up relatively well

despite average earnings falling in real terms• Short-term pay expectations subdued• Employee satisfaction with pay in the UK relatively high

compared with European countries – because UK employees relatively well paid