Employers to use benefit schemes to soften blow of low pay rises

Companies will put a greater emphasis on employee benefits as salary increases remain static, says Aon Hewitt

Employers are likely to put a greater emphasis on the benefit schemes they offer employees in order to make up for low pay rises, according to Aon Hewitt.

The latest salary survey from the firm shows that salary increases in the UK remained unchanged at 3.2% over the past six months.

While this is better aligned with inflation than during the previous six-month period – the Consumer Prices Index hit a high of 5.2% in September 2011 – it is still lower than the current CPI rate of 3.6%.

Vincent Cornet, compensation lead for Aon Hewitt in Europe, the Middle East and Africa, said companies continue to face challenges in how to reward performance and retain key talent.

He said: “Our experience and additional research would suggest that we are likely to see a greater emphasis on effectively communicating the value of total reward packages to employees.

“This might include highlighting the worth of employee share plans, healthcare programmes and other benefits.”

The survey notes there is a growing feeling of stability among employers across Europe, which is good news for employees given the recent falls in inflation rates. With the exception of the UK, salary increase budgets are now marginally higher than CPI rates across Western Europe.

Andrew MacLeod, leader of Aon Hewitt’s pay research practice in Europe, Middle East and Africa said: “The survey offers encouraging news for UK employees and employers alike.  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.

“We are now beginning to see salary increase budgets better aligned with - albeit slightly below - price inflation.”

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