The strain on pay levels due to cost of living changes has created pressure on pay and reward frameworks.

Pay benchmarking allows businesses to create fair and equitable pay structures for their employees. Looking at total reward and the value employees derive from their pay, benefits and the culture of the workplace, puts businesses in a strong position to reduce employee turnover and retain the skills needed for success.

Using Budget Effectively

The demands facing employers when it comes to pay and balancing this with affordability causes huge pressure on pay frameworks. Pay settlements are at their highest level for 32 years and were worth a median 6% in the three months to the end of March 2023, according to XpertHR research. With inflation remaining high for now, tensions between employers and employees when it comes to pay are likely to remain heightened, so businesses need to ensure they are allocating their pay budget most effectively.

Reward is one facet of people’s broader expectations in terms of organisational culture, career progression and development, well-being and general investment in employees. To create a compelling total reward offering that meets the needs of a diverse workforce, organisations must understand what is key to their employees.

Diverse workforces and hybrid working are impacting how reward and benefits are now viewed by employees and candidates, says Sarah Jefferys, Head of Reward Consulting at Gallagher. Organisations also recognise the need to design pay policy programmes to suit a variety of demographics.

“We can expect to see a greater focus around enhanced diversity within reward structure, making it easier to address employees’ needs as individuals, while creating a greater employee value proposition,” says Jefferys. “Service or status-based approaches are in decline, while fairer and more equal practices are on the rise. For example, the annual leave trend is moving towards a single status holiday entitlement and nearly 60% of organisations are applying the same holiday entitlement to all employees, up on last year’s 52%.”

Employers are asking us to support them on how to be more innovative with budgets and bolster their approach to total reward. Underlining the wider value on offer when it comes to supporting issues that employees care about – from embedding diversity and inclusion to flexible working and greater support at critical lifetime milestones such as fertility treatment or menopause – can reduce the pressure on pay frameworks in the current economic climate.

Bringing Pay Transparency

Pay benchmarking refers to the process of comparing salaries with other employers, often within your industry sector, allowing you to make informed decisions on how to recruit and retain talent whilst ensuring pay is at market rate.

This is one of the most effective ways of ensuring you are offering a fair, appropriate wage to your talent. When a candidate can see that transparent salary benchmarking and role evaluation form part of your company’s reward strategy, this reinforces a commitment to fairness and career progression. As a result, your job offering is painted in an attractive light, encouraging applicants to come forward.

Organisations need to consider whether high pay increases are a sustainable, long-term approach or whether this risks undermining internal pay equity across the organisation for short-term benefit. Joining bonuses are a popular alternative, preserving the pay frameworks in place.

The new EU Pay Transparency Directive puts extra emphasis on pay transparency. EU companies will be required to share information about how much they pay women and men for work of equal value and take action if their gender pay gap exceeds 5%. We support our clients to be prepared for transparency alongside the creation of action plans to reduce their pay gap.

Reward Consulting Services

Gallagher Reward Consulting are an independent reward consultancy, and are able to assist organisations to source multiple relevant data points for pay benchmarking and budget planning to ensure the best outcomes.

To talk to Gallagher about how we can support you to make the most of your budgets and create greater transparency in pay for your employees, please contact Sarah Jefferys, Head of Reward Consulting on 07767 164795.


1. Xpert HR:

2. Research conducted by Gallagher, 4th April - 2nd June 2023, amongst 247 U.K. organisations.