Payback time as workers seek to cash in on economy

Pay rises back on the agenda as workers seek to reverse drop in living standards

It's been a long time coming, but it looks as though pay rises are finally back on the agenda. With most workers having seen a substantial drop in living standards in recent years, they will welcome the news that employers are preparing to reward staff more for their work.

But, lest anyone start getting too excited, it’s worth bearing in mind that most pay rises will likely be small and hard won.

Moreover, you can be sure that if employers can find a way to wriggle out of giving you more money, they inevitably will.

According to a survey undertaken by Ibec at the start of 2015, up to 57 per cent of companies plan to increase their employees’ salary levels this year with most expecting pay packets to grow by about 2 per cent.

A similar report from PricewaterhouseCoopers (PwC) shows three-quarters of Irish businesses planning to reward staff this year, with about a third of the 132 companies surveyed also intending to offer or enhance bonuses.

While this is all good news for staff, some companies are worried about the pressure increased salaries will put on businesses.

With the economy still in a fragile state, many businesses are still in survival mode and, inevitably, pay rises will affect profitability.

For this reason, Isme, the Irish Small and Medium Enterprises Association has consistently urged members to hold steady on wage demands.

No choice

Businesses may have little choice but to stump up extra this year, however, despite many remaining cautious, according to Louise O’Reilly, manager, PwC Reward Advisory Services.

“With increased confidence in economic growth and companies looking to expand their workforces, the pressure will be on employers to recognise employee efforts and the value of holding on to the good people they have,” she said.

PwC’s study indicates pay rises aren’t limited to any particular industries, but staff performance is key to gaining a salary increase.

“Our survey shows that 78 per cent of companies expect to apply a modest pay increase in 2015, but the level of increase will vary. The biggest driver of increases is individual performance with companies rewarding those that contribute most to the business. The link between performance and reward is unquestionably becoming stronger,” said Ms O’Reilly.

A study undertaken by Hays Recruitment, meanwhile, shows more employees anticipate changing jobs this year as a recovering economy shifts in their favour.

"It's a classic case of supply and demand. Our survey shows three in five employees want to change jobs in the next 12 months. In areas where certain skill sets are thin on the ground, such as IT, life sciences and construction, salaries are being driven up," said Hays Ireland's managing director Richard Eardley.

Additional cost

He said employers may be reluctant to pay out more to staff but need to weigh up the additional cost against the expense of hiring in someone new.

“Don’t underestimate the value of a productive member of staff. It they leave, it can cost more in time, training and even salary to replace them.

“While every company is constrained in what they can offer staff, managers should have regular conversations with their employees around well-being so they can at least address issues ahead of time, rather than leave it until a resignation letter arrives,” he added.

Ms O’Reilly echoes this sentiment, pointing out that there are many ways to reward employees.

“Given tight budgets, companies must look at all aspects of reward and recognition, including incentives, work-life balance benefits, training and career opportunities, and deploy them to their strategic advantage.

“It is important not to lose sight of the non-financial reward elements. Organisations should monitor and manage any demographic changes that will affect their ability to compete effectively and reward in line with employee and generational requirements. Different employees will be motivated by different rewards and ultimately they need to be tailored to the company and individual,” she said.

This may well be the case but as Michael McDonnell, managing director at CIPD Ireland, a professional body for HR and people development says, cash remains king for many employees at this point.

“There is a perception that pay has gone out of alignment with the contribution employees are making, while at the same time workers have less net disposable income because of all the levies and indirect payroll taxes. Therefore, a pay rise would be more attractive than promotion, although the two are not mutually exclusive.”

Mr McDonnell cautions that pay-hungry employees should be aware that plenty of private sector employers have yet to make a decision on whether to increase salaries while others are keen to maintain the status quo.

He suggests in most cases it is up to workers to approach management about a salary rise.

“Employers will always be slow to offer pay rises that are not specifically sought by the employee. However, there is certainly evidence of a more benign and receptive environment with employers being willing to make pay increases.”

Bottom line

You may think you deserve a salary increase, but the chances are your employer will push back if you approach them about one. How do you make a convincing case?

“Every boss is concerned about the bottom line so that’s the language you need to use in seeking a pay rise.

“Be able to justify your request based on what you offer the company – how your unique expertise contributes to and continues to enhance the bottom line performance of the organisation,” said Melrona Kirrane, an organisational psychologist and lecturer in human resource management at Dublin City University Business School.

“You need to show how central you are to the workflow and how critical your skills are to company performance. Show how the pay rise will ultimately contribute to better figures for the organisation because it has to not be solely about you. Lastly, be realistic and propose a salary rise that is market sensitive.

Also, be careful with "or else I'll leave" type of sentiment as you may be forced into a situation in which you have to do just that," she added. Top tips on . . . Securing a pay rise 1 Do your research: Research the market rate and see what salaries are on offer for people in similar roles as yours 2 Timing is everything: Consider the right moment to ask for a rise, such as during a performance review or when being praised for a successful project you've been involved in rather than bringing it up first thing on a busy Monday morning 3 Make your case: No one gets anything for free, so lay out specific reasons why you think you're due a rise and how it will benefit the company in the long run 4 Talk to your line manager: Chances are that if you want a rise then your superior will be called upon to give their evaluation of you. Given this, it's useful to find out whether you've got their backing ahead of time 5 Consider other rewards: If your employer can't afford to raise your pay, seek an alternative such as increased holiday time, a promotion, more training, flexible working etc 6 Be prepared to negotiate: Don't ask for the sun, the moon and the stars and don't expect to get what you demand. You might well get a compromise offer or no offer at all, so consider this ahead of time 7 Don't threaten: Suggesting you'll walk if you don't get properly rewarded will only antagonise an employer and leave you in a vulnerable spot 8 Prepare for no: Consider if you're prepared to stay in the event of a negative response and, if not, start working on alternatives