There are several issues that will affect the confidence and performance of organisations, and consequently pay strategies, in 2021. This will, however, vary between industry.
The most obvious issue is the Covid-19 (Coronavirus) pandemic and the continuing economic fallout that many organisations are having to contend with due to restrictions. At the time of writing, a national lockdown lasting seven weeks has just been announced.
Our path out of the pandemic is also still not clear although things are looking up now that the vaccine rollout has started. How quick and easy our recovery will be, though, is still a guessing game and is also going to impact pay decisions in 2021.
Organisations are also adjusting to operating in a post-Brexit Britain. While we have secured a free-trade deal for goods with the European Union, many unknowns remain and we will need to wait and see to understand the full impact Brexit will have on the manufacturing and service sectors, be it good or bad.
Given the on-going uncertainties organisations face on many fronts, it is hard to make any firm predictions on pay for 2021. This is reflected in the preliminary findings of the Chartered Institute of Personnel and Development’s (CIPD) latest Reward management survey, published in November 2020, which found that the bulk of employers are undecided about their pay decisions for the coming year.
Just as important as what pay decisions are made is also how they are made. This year, we will see a further focus on fairness with full chief executive pay ratio disclosure, the resumption of gender pay gap publication and, possibly, official guidance on ethnicity pay reporting. Coupled with wage freezes and cuts, these pressures mean employers must ensure their pay processes are fair in order to justify their decisions to employees, investors and customers.
Charles Cotton is senior performance and reward adviser at the Chartered Institute of Personnel and Development.