Controlling pay costs

In the past 6 years, we have experienced an unprecedented adjustment in wage costs through reductions in pay, pay freezes, changes in pension provisions, redundancies, recruitment embargos and reduction in working time.

The economy is growing again, unemployment is falling and wage increases are back on the agenda. Small business, in particular, may not have the experience of negotiating pay deals; benchmarking wage rates; structuring productivity arrangements to support growth and increased flexibility in the business.

Pay levels are influenced by factors outside the employers’ control, supply / demand in the labour market and the operation of government policy.

Prior to 2008, the demand for labour to support economic growth pushed up wage costs to unsustainable levels. As the major employer in the economy the government set wage levels for the public sector and through mechanisms like the National Wage Agreements and the National Minimum Wage established the bench mark for wage levels and annual increases.

If you pay high wages and bonuses you will get people to do almost anything. However the impact of high pay may be short lived, within 6 months individuals will forget the bonus and take the high pay rates for granted. It is respect, recognition and opportunity that are the long term motivators for productivity and innovation. Employers should create opportunities for employees to develop skills and experience a sense of achievement.

Vincent has extensive experience of negotiating pay deals at industry level and for stand-alone business.