Average pay for many UK employees in clerical and entry-level professional roles stagnated in 2012 as small annual pay rises were nullified by relatively high inflation, while experienced professionals enjoyed average pay rises of six per cent, according to Towers Watson.

Towers Watson’s Global 50 Remuneration Planning Report, launched today, provides a breakdown of pay movements by job level, allowing roles around the world to be directly compared. For clerical roles (Global Grade 6) and entry-level professionals (Global Grade 8), pay rises averaged zero and almost one per cent respectively in the UK, which translates to a pay cut of 2.8 per cent and 1.9 per cent when accounting for inflation (2.8 per cent). However, more senior employees such as experienced professionals (Global Grade 11) received more substantial pay increases on average of nearly six per cent, or over three per cent above inflation. The trend does not continue up the organisation with middle manager (Global Grade 14) pay moving more modestly at just under two per cent, a real-term reduction of nearly one per cent.

Darryl Davis, Senior Consultant in Towers Watson’s Data Service division commented: “The emerging pattern in the UK in the past 12 months shows base-pay rises at the bottom and top of organisations to be muted, whereas those in the middle are benefitting from more substantial increases. There is no question that companies have had their reward budgets squeezed this year and many are opting to use them to offer meaningful rewards to those they feel are likely to add the most value to the company, rather than spreading them thinly across the whole organisation.

“Interestingly, pay increases do not keep on rising as roles become more senior. While base-pay rises for middle managers remain below inflation, they can be off-set by variable pay – such as bonuses – which play a more significant role in total reward packages at this level.”

Western Europe

Pay movements in Western Europe broadly matched those in the UK in 2012 with Spain, Portugal, the Netherlands, Italy, Ireland, Germany and Austria all experiencing repressed pay movements and real-term pay cuts for clerical and entry-level profession roles. The biggest exception to this trend was in France where pay increases of nearly five per cent for clerical and over three per cent for entry-level professionals were the average, providing real-term pay increases, despite inflation, of over two per cent.

Rest of the World

Outside Western Europe, Canada and Japan benefitted from double-digit pay increases and very low inflation providing substantial base-pay increases at almost all levels. Conversely, in China market median salary increases have cooled substantially and have not necessarily kept pace with inflation there. Even higher inflation in Brazil (over five per cent) has reduced the impact of relatively high pay rises, with many workers facing a real-income reduction despite increases in median salaries above those seen in Europe and the US.

Darryl Davis said: “Within the context of Western Europe, the UK is broadly in line with other countries in offering muted base-pay increases that struggle to match inflation. Corporate confidence is higher in many countries outside of Europe and this has led to significantly higher pay rises, particularly in countries such as Canada, the US, India and Japan.”

Variable Pay

Variable pay – predominantly bonuses but also deferred rewards and long-term incentives – were highest for entry-level professionals, who received nearly 60 per cent increases on last year. For other levels the results were less spectacular with some, such as middle management, seeing bonus levels reduced by almost 20 per cent. In Western Europe, France bucked the trend, with bonus awards up to 100 per cent higher for junior clerical and entry-level roles and increases of nearly 50 per cent for middle management.

Carole Hathaway, Rewards Practice Leader for EMEA at Towers Watson said: “Variable pay provides a way for organisations to protect themselves against increasingly high fixed payroll costs. This is a popular option in uncertain economic climates as employees can be rewarded once the organisation has a firm picture of its own financial performance and stability. Consequently we are seeing more emphasis on variable pay programmes being used to make up for lower base-pay increases.”