Business woman (4)

As gender pay gap reporting is expected to come into force this April, many businesses have raised concerns that, along with the ‘cocktail’ of issues facing the UK economy, pay gap reporting will influence when and by how much, employees gain pay increases in 2016.

We questioned employers who have January and April pay reviews, asking if they have already set their pay budget for the year ahead. The figures indicate that wage inflation will not pick up this year, reinforcing Chancellor George Osborne’s warning of a slowing global economy.

Inflation obviously has an influence on pay settlements with the current Consumer Price Index being around the zero mark, and the Retail Price Index currently stagnant at one percent since last February. However, the biggest concern raised by businesses reviewing their pay structures is the introduction of pay gap reporting.

A number of employer’s state that they need to address any potential gender or equal pay concerns before considering what pay increase to offer.

Whilst pay gap reporting may not be solely responsible for the pressures on pay reviews in 2016, it has become a new contributing factor that has raised more challenges than first proposed by the government.

Although HR departments are at the forefront of gender pay and equal pay discussions many have struggled to build a business case for equal pay within the rest of their organisation.

Over the past few years, the trend has commonly been to pay individually-determined increases, rather than an across-the-board increase to all staff. This enables employers to target their pay rewards to the highest performing individuals and those with the greatest external market pressures.

However, this approach may now be re-considered, as the landscape of pay changes with the new legislation.

When we held an 'Equal Pay Seminar' last November, it was clear that many had not yet looked at the equal pay issue whilst others had only briefly researched what it may possibly mean for their organisation.

We expect few, if any employers to freeze pay this year, probably less than one percent of organisations.”

With our spring survey expected to be released in April, it will be interesting to see where organisations stand on pay as the new legislation is introduced.

By Tim Kellett, Director of Paydata