By Marcus Leach

Two in five employers fail to communicate the rationale behind their decision to raise, cut or freeze their employees’ pay and, of those who do communicate, less than one in five relate the decision to the individual’s performance.

That’s according to the Chartered Institute of Personnel and Development (CIPD)’s annual survey of Employee Attitudes to Pay, which also found that communication is the key to ensuring that employees remain satisfied, even when they don’t get the pay decision they were hoping for.

The survey found that a larger proportion of employees received pay cuts or freezes in 2011 than in any year since 2008 and that satisfaction, even amongst those who received a pay rise, had diminished year-on-year in the same period. However, satisfaction levels in 2011 were higher amongst those whose employer had explained the pay rise to them (net satisfaction of 68 versus 33).

Additional findings:

· Respondents who received a pay cut were most likely to say that their employer explained their decision to them (76%), followed by those who have had a pay rise (62%) and a pay freeze (57%).

· According to employees, the most common explanations given to them by their employers for the pay decisions were: the state of the economy (45%); how much money the organisation has to spend (38%); and the performance of the individual (15%).

· The overall net satisfaction score given by employees for their employer’s explanation is +32, down on the +40 recorded in 2010. In the private sector the net satisfaction score is + 42 (unchanged on 2010) and -3 in the public sector (down from +24 in 2010).

· Among those who received a bonus (18%), the net satisfaction score is +61. The most common explanations for bonus satisfaction were: it reflected how well I had performed at work (37%); it reflected how much money the employer has made (31%); and it reflected how well my team had performed at work (18%).

· 79% of respondents reported that their employer explained to them the reasons behind the size of their bonus. The most common explanations given by employers were organisational (57%) and individual performance (53%).

· Among those who received an explanation for the size of their bonus the net satisfaction score is +73.

· When asked if employees felt valued, the net satisfaction score was +4 (compared to +33 in 2008). Over the same period net satisfaction scores have fallen for: ‘I am proud to work for this organisation’ (+50 to +32); ‘I feel motivated to perform well’ (+46 to +24); and ‘my organisation communicates well with me’ (+25 to -6).

“2012 looks like it will be another year of subdued pay rises for many in the private sector and pay freezes for most of those in the public sector," Charles Cotton, rewards advisor at the CIPD, commented.

"While inflation looks set to fall and personal allowances due to rise, these will not be enough to increase real earnings back to their pre-recessionary levels.

“The challenge for employers is to keep staff motivated at work while many employees see their living standards hit. Organisations should review how they communicate the economic realities the business faces and what needs to happen for pay to increase.

"Managers face a tough challenge in maintaining employee commitment and motivation but the penalties of failure will be falling national productivity and a vicious circle of continued declines in pay and jobs as we lose out to our international competitors.

“Our survey findings suggest that employers attach more importance to communicating pay freezes and cuts than they do pay rises. However, with only 19 per cent of employees feeling that their pay rise reflected their performance, there is clearly a need for improved communication of positive news, so that employees feel valued and understand what’s important to their organisation. Only then might employees remain engaged with their work and motivated to perform well.”

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