​UK reward model is failing, says IES

UK employers and policymakers should buck up their ideas on pay practices in order to address low levels of employee engagement and productivity, according to a research paper by the Institute for Employment Studies. The report’s author, Dr Duncan Brown, IES Head of HR Consultancy, reckons pay practices need invigorating, particularly in the areas of low wages, gender pay and total reward. What’s more, recruitment shortages and skills gaps will likely worsen as the UK leaves the European Union.

Brown’s review of pay practices in the past three decades shows a shift towards more market- and performance-related pay, together with a growth of individualised and flexible reward practices. However, the paper suggests that pay risk has been transferred to employees over the past 30 years, and that pay fairness has taken a back seat as wage differentials widened. Since the crash of 2008, many UK employers have adopted low-cost reward models, and awarded modest increases in basic pay, which go hand-in-hand with stalled salary progression, limited benefits and uncertain working hours.

Dr Brown says:

‘The UK’s productivity woes, lagging behind countries like France and Germany, are partly due to a lack of investment in skills and too many businesses benefiting opportunistically from a prevailing culture of low pay.’
‘Fairness, flexibility and affordability’, Dr Duncan Brown, Institute for Employment Studies, February 2018: www.employment-studies.co.uk/resource/fairness-flexibility-and-affordability