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UK salary rises 'have stabilised'

05 April 2012

UK salary rises "have stabilised" Posted by Editorial team

Salary increases in the UK have remained unchanged over the past six months, a new Aon Hewitt survey has shown.

The average pay rise stayed at 3.2 per cent throughout the winter, data collected from 164 companies across the country showed.

Andrew MacLeod, leader of Aon Hewitt's pay research practice in Europe, Middle East and Africa, said: "This is encouraging news for UK employees and employers alike."

He explained the results of the latest Salary Survey show the situation is improving for British workers and firms.

"High UK price inflation was the running theme of 2011 which resulted in the erosion of employees' disposable incomes and placed significant pressure on employers to increase pay budgets," Mr Macleod commented.

"We are now beginning to see salary increase budgets better aligned with - albeit slightly below - price inflation," he added.

The data, which was collected in January and February of this year, also showed a similar picture across Europe, with salary rises stabilising despite the continued economic difficulties across the region.

Furthermore, lower inflation rates have made the real value of the wages higher, with the consumer prices index falling from 5.2 per cent in September 2011 to 3.4 per cent in February 2012 - but the UK is the only country studied where remuneration budgets still lagged behind rising living expenses.

Compensation lead for Aon Hewitt in Europe, the Middle East and Africa Vincent Cornet noted, however, that firms have not taken the opportunity to lower salary increase budgets as inflation rates decreased.

"With the prolonged period of economic downturn and continued austerity measures, companies feel the need to show a positive sign to employees," he explained.

"The question for companies will be how to reward performance and retain key talents," Mr Cornet said.

Michael Scutt, partner at niche employment law practice Dale Langley & Co, recently advised companies who do not have the budget to keep all of their talent to offer a different package with their personnel.

However, he warned that workers need to be informed of the changes to their remuneration before they are made, otherwise employers could find themselves facing tribunals.

Staff members are more likely to agree to these kinds of changes if they are explained in a way that shows the rationale behind them and when it is made clear the alternations are temporary, Mr Scutt added.

Mr Cornet suggested organisations may consider communicating to those on their payroll their total reward packages, including any employee benefits they receive, like pensions, healthcare programmes and share plans.

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