What do employees think about pay? Mark Beatson, Chief Economist Charles Cotton, Pay and reward adviser Presentation to ONS Labour Market Statistics conference March 2014

Contents How important is pay to employees? How satisfied are employees with their pay? Do employees think they are paid fairly? What did employees think about their last pay rise? What do employees expect for the year ahead? International comparisons Conclusions

1. How important is pay to employees?

Importance of pay for decision to seek paid work (% of employees, GB) Source: British Social Attitudes Surveys.

2. How satisfied are employees with their pay?

Employee descriptions of their pay (% of employees, GB) Source: British Social Attitudes Surveys.

Employee satisfaction with pay (WERS, mean score, UK) Private sector Public sector Source: van Wanrooy et al, ‘Employment relations in the shadow of the recession’.

Employee satisfaction with pay (“Considering all my efforts and achievements in my job, I feel I get paid appropriately”,% employees, GB, 2010) Source: European Social Survey, 2010.

3. Do employees think they are paid fairly?

Justice and fairness of employees’ pay (% of employees, GB) Source: British Social Attitudes Surveys.

Pay equity at the workplace (views on gap between highest and lowest paid at the workplace, % of employees, GB) Source: British Social Attitudes Surveys.

Pay equity in society (% employees who agree ordinary people do not get their fair share of the nation’s wealth, GB) Source: British Social Attitudes Surveys.

4. What did employees think about their last pay rise?

CIPD employee attitudes to pay surveys What – employer pay decisions; the basis of these choices; employee reactions to these decisions; and employee pay and bonus decision forecasts. When – research carried out between 19 December 2013 and 7 January 2014 How – 2,683 working adults, across all industrial sectors, questioned via an online survey by YouGov Why – pay is a significant element of total costs, what is the ROI on that expenditure

Changes in the nominal pay of employees in the previous 12 months (% of employees, excluding don’t know/can’t remember responses) Respondents were instructed to exclude promotions, demotions, regrading and new jobs. Sources: CIPD Employee attitudes to pay surveys, 2008 to 2011 and CIPD Employee Outlook survey, winter 2013/14.

Pay rises in 2013 Upper quartile 4.00% 1.00% 2.00% 3.00% Median 2.10% Private Public Voluntary All Upper quartile 4.00% 1.00% 2.00% 3.00% Median 2.10% Lower quartile 1.90% Mean 4.48% 2.78% 2.55% Source: CIPD Employee Outlook survey, winter 2013/14.

Employee satisfaction with most recent pay outcome (% of employees, excluding don’t know/can’t remember responses) Source: CIPD Employee Outlook survey, winter 2013/14.

Why employees were dissatisfied with pay outcome (% of employees dissatisfied) Source: CIPD Employee Outlook survey, winter 2013/14.

Why employees were satisfied with pay outcome (% of employees satisfied) Source: CIPD Employee Outlook survey, winter 2013/14.

Employee satisfaction with pay outcome depends on the quality of communication (% of employees, excluding don’t know/can’t remember responses)

How many employers communicate? 51% of employees received an explanation over the pay decision made by their employer in 2013, down on the 62% in 2012. Pay communications by sector, 2013 Sector Increase Freeze Cut All Private 55% 41% 49% Public 61% 50% 71% 56% Voluntary 64% 30% Source: CIPD Employee Outlook survey, winter 2013/14.

5. What do employees expect for the year ahead?

Employees’ one year ahead pay predictions (% of employees) Sources: CIPD Employee attitudes to pay surveys, 2008 to 2012 and CIPD Employee Outlook survey, winter 2013/14.

Employee pay predictions for 2014 Private Public Voluntary All Upper quartile 4.00% 2.00% 3.00% Median 1.00% Lower quartile Mean 4.02% 2.64% 2.73% 3.66% Source: CIPD Employee Outlook survey, winter 2013/14.

6. International comparisons

Importance of a high income in choosing a job (% of employees, 2010) Source: European Social Survey, 2010.

Perceptions of pay across Europe Sources: Left panel: European Social Survey, 2010.; Right panel: European Working Conditions Survey, 2010.

Correlation of perceptions of pay with level of pay Sources: European Working Conditions Survey 2010 (perceptions of pay); OECD (average earnings).

7. Conclusions Pay is the most important reason why most people work – though declining in importance? Pay is important for job choice About half of employees satisfied with their pay – is this going up? Satisfaction with pay associated with relative pay levels Satisfaction with recent pay rises has held up relatively well despite average earnings falling in real terms Short-term pay expectations subdued Employee satisfaction with pay in the UK relatively high compared with European countries – because UK employees relatively well paid