A large proportion of employees do not understand how their salary links to their performance, according to the most recent Chartered Institute of Personnel and Development (CIPD) Employee Attitudes to Pay and Pensions survey.

While 51% of employees surveyed said their organisation had explained the rationale behind pay rises to them, 76% said they had failed to inform them of what they actually needed to achieve this.

Only 26% said their employer gave them the training they needed to gain a pay rise in the future.

Explaining the businesses rationale

Charles Cotton, the Performance and Reward Advisor at CIPD, advised that employers should consider the return on investment they can gain from explaining their rationale to employees.

He went on to note that employees are generally much more content with their salary if employers take the time to explain the reasons behind their decision.

Almost one quarter (23%) believe their pay increase did not reflect their performance at work which represents an increase of 4% since 2013.

Paying to attract the right talent

Cotton noted that employers must weigh up the investment of increasing wages in line with what the company expects.

Without doing this, employers may struggle with recruitment and retention as potential employees may believe they can earn a higher salary elsewhere.

PricewaterCoopers (PwC) conducted an analysis of employers on the back of these results and found that a massive 65% of businesses are becoming more transparent with their salary increases with as many as 43% giving clear descriptions of targets and performance levels required for a pay rise.

Head of PwC’s Reward Practice, Tom Gosling, added that companies are “improving disclosure” of pay rises and rewards; a trend he believes will continue.

Gosling noted that employers can still pay to attract the right talent but the higher salaries are getting harder to earn with “an improved link between pay and performance”.

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