1. Planning your 2018 Pay Review
Webinar
Ann Cummins and Caroline Oates

2. Agenda Agenda Consulting What influences pay reviews? 2017 recap
Looking forwards to 2018
Your questions

3. Agenda Consulting
Research Consultancy working with not-for-profit organisations:
Employee and Volunteer Engagement Surveys
Pulse, On-boarding and Exit Surveys
HR and Volunteer Management Benchmarking Studies
Reward Consultancy
Reward surveys
Annual Pay Review Survey
Social Care Reward Benchmark Study

4. What factors influence pay reviews?
Your pay policy
Economic factors
Inflation
Pay trends
Your pay system (increments/open range/performance?)
Affordability

5. What influences pay awards?

6. The economy: 2017 High employment
Interest rates increasing slowly (1% by 2020*)
Inflation about to peak (3.2%*)
Real incomes falling behind
Uncertainty over Brexit
Low wage rises – doesn’t fit economic theory
*source: Bank of England November 2017 Inflation Report

7. The economy 2017/2018 Indicator Forecaster 2017 2018 GDP
UK Treasury Independent forecasts
1.6%
1.5%
IMF
1.7%
Unemployment
4.4%
4.5%

8. Inflation to September 2017
Index as at October 2017
Explanation
CPI: 3% over 12 months to September, (2.9% in August)
European standardised inflation measure i.e. the government's main measure, used as index for changes to state pensions, personal taxation, and benefits.
CPIH: 2.8% over 12 months to September, (2.7% in August)
As above, but includes cost of owner occupied housing; confirmed this year as an official statistic.
RPI: 3.9% in September over 12 months, unchanged from August.
Status as an official government statistic removed in February 2014 as it does not meet international reporting standards, but still used for some government indices, such as excise duties, rail fares, index linked bonds and savings.
Source: ONS Inflation statistical bulletin October 2017

9. Inflation projections
Q4 2017
Q4 2018
HM Treasury summary of independent forecasts CPI %
2.9
2.4
Bank of England November Inflation report
CPI %
3.0
HM Treasury summary of independent forecasts RPI %
3.9
3.2

10. Pay settlements: 2017 Source % increase Notes ONS Statistical Bulletin
3 months to Sept 2017:
2.1% inc. or exc. Bonus
(0.4% lower adjusted for inflation)
Average earnings
HM Treasury summary of independent forecasts
2.2%
Agenda Consulting - settlements
1.5%
Inter-quartile range 1% - 2%
Up from 1% reported in 2016
Croner Reward - settlements
2% increase in settlements
But headline figure – quote 3.5% inc. in median pay – explained by change in survey composition
XpertHR database
Private sector: 2%
Public sector: 1%
Settlements for period ending October 2017: two-thirds are same or lower than last year
Organisations with merit pay reported overall pot of 2.5%
XpertHR voluntary sector survey 2017
Last award: 2% (matched sample)

11. Looking ahead Brexit – shortage of key skills
Living Wage up 3.6% to £8.75 and London up 4.6% to £10.20
Real wages: how long will wages rise slower than inflation?
Public sector cap lifted for some
Inflation flattening off/reducing
Low productivity
Brexit uncertainty
Social questions have emerged- fairness and exploited workers/zero hours, anti-globalisation and big business, legislative intervention

12. Pay forecasts for 2018 Source % increase Notes
HM Treasury summary of independent forecasts
2.5%
Average earnings year end 2018
Agenda Consulting – Pay award survey October 2017
Median: 2%
32% of organisations don’t yet know
Croner Reward - settlements
Median 2%
Predictions as at mid-2017
XpertHR database
Private sector: 2%
October soundings
XpertHR voluntary sector survey 2017
1.7%
1.8%
Increase in basic salaries
Increase in pay bill

13. Other pay facts
Incremental costs not reported – will add to overall cost
Performance link to pay:
Agenda : 26% of organisations have a performance link to pay
XpertHR : 26% performance pay link
Croner Reward: 17.4% reported performance related pay - average award 2.7%

14. Data sources Office of National Statistics: Inflation bulletin
Labour bulletin
HM Treasury Independent Forecasts
Bank of England Inflation Forecasts: quarterly
CIPD Labour outlook: quarterly
Agenda Consulting annual pay award survey
XpertHR & Croner annual Reward surveys
XpertHR pay database

15. Contact the reward team
Ann Cummins, Principal Consultant
Paul Chadwick, Senior Consultant