As the new financial year beckons, organisations are starting to consider what pay awards to offer their employees this April. In the midst of already challenging times for the social housing sector, we are now seeking to comprehend the full economic implications of Brexit and the potentially far-reaching changes being played out on the global political stage.
In this tough operating environment, any business contemplating its pay awards inevitably needs to take into account affordability and the current financial climate. But it is crucial they do not forget the important consideration of maintaining motivation and morale among staff which are key to recruiting and retaining a high quality workforce.
Our annual Total Reward Survey in 2016 revealed that the number of housing associations making pay awards over the last year dropped from 97% to 60%. It showed that, while the private sector recorded average increases of 3.5% in Quarter 2 (although this has since dropped), a third of housing associations indicated they would not be giving a pay increase in 2016 with 60% awarding between 0.5% and 2%.
This is a significant drop on the previous year, when 53% offered pay rises of between 1.5% and 2% and 25% awarded more than 2%. The downward trend was largely attributed to the 1% rent reduction imposed on the social housing sector, which also led to 2.9% of associations cutting salaries, 41% making staff redundant, 13% amending staff terms and conditions and 16% reducing development programmes.
The survey also revealed that health care benefits were reduced by an average of 12% on 2015 levels for all except care employees, and only 64% of housing associations – down from 70% in 2015 – were offering six month full/six month half pay schemes for sickness.
There was also a steep drop in subsidising membership fees for health and sports clubs (down from 65% in 2015 to 48% in 2016), providing Employee Assistance Programmes (reducing to 82% from 87% in 2015) and offering final salary pensions (offered to 12% of new starters in 2016, compared to 16% the previous year).
Our survey indicates a worrying move towards lower – or zero – annual pay awards in the sector, as housing associations up and down the country tighten their financial belts. But I would offer a word of warning when considering a reduction in possible pay rises and changes to staff’s terms and conditions of service.
With dwindling pay awards and less generous employee benefit packages, they risk seeing demotivated and demoralised staff leaving in their droves to join the private sector in search of a better deal. So housing organisations need to look across the board at what other employers in all sectors are offering and think more imaginatively about the package of benefits that will attract good staff and maintain morale. This may include more flexible working arrangements, which we are finding more and more people are seeking in order to improve their work-life balance.
Interestingly, last year’s Total Reward Survey showed that around 70% of staff were able to work under flexitime schemes including part-time working which is offered by 95.9% of associations and job sharing operated by 82.2% of organisations. The ability to accrue time off is also enjoyed by 91% of office staff (up 10% on 2015 levels), whilst home working is contractually available from 13.7% of associations and from 92% informally.
The survey – which was completed by 94 housing associations, managing a combined total of 987,000 homes, last July – revealed that competition with the private sector was also being maintained through provision of bonuses and performance-related pay, which has increased since 2015. The number of employees receiving bonuses increased by 2.5% for directors, 5.5% for senior managers, 8% for manual employees and 10.5% for sales staff with bonus payments averaging 12.5% of salary, up from 7.5% in 2015.
To ensure their successful future, it is vital that social housing providers continue to compete with the private sector. Of course all organisations need to be realistic and think about the current turbulent economic and political environment they are operating in. But housing associations must keep in the forefront of their minds the necessity of attracting and keeping high calibre staff. It is only by achieving this that they can become more commercially minded in order to rise to the ongoing challenges they face in these uncertain times.
Ian Robertson, Executive Director at EMA