Managers unlikely to see large salary increases this year
In their latest Executive Compensation Review, IDS reveals that across the whole of the UK economy, salary increases for managers and professionals are forecast to average 2.3% in 2014 – suggesting the pay squeeze will continue into 2014.
Managers and professionals in the private sector are, however, expected to do nearly twice as well as those working in the public and not-for-profit sectors with an average forecast increase of 2.5% against 1.3% in the public sector.
The report also reveals that pay freezes in the private sector seem to be in decline. Some 16.7% of private sector management reviews in 2013 were pay freezes, whereas only 9.3% indicated that they would be implementing a pay freeze in 2014.
“Managers are unlikely to see significant uplifts to their salaries during the upcoming pay round with around three quarters of all management pay awards falling in the first six months of the year,” says Adam Cohen, author of the report.
“Management pay trends over the coming year will be similar to the last 12 months, with few dramatic shifts in direction being signalled by employers. The UK economy may be on the road to recovery, but our own survey of employers’ expectations suggest that this greater prosperity is unlikely to translate into higher pay awards for managers and professionals this year.”
The survey found that median basic salary levels for main board directors in the private sector were running at £188,173, well above levels of public/not-for-profit sector counterparts for the same role at £112,044.
At other job levels, median salaries for heads of function in the private sector were running at £95,000 – three and a half times the UK median salary of £27,000 according to the Office for National Statistics.
Lower down the seniority ladder private sector middle managers earn £51,620 almost twice the UK median salary – even before bonuses are taken into account.
Increasing importance of bonuses
In addition to basic salaries, bonuses are an important part of the pay package particularly in the private sector says IDS.
The proportion of private sector employees eligible for a bonus ranged from three quarters of board members to three-fifths of professional and technical staff. The median on-target bonus for directors in the private sector equalled 50% of salary, compared with 9.1 % for junior managers.
In the public and not-for-profit sectors, bonus payments are both less widespread and less generous. Only 37.3% of board members qualify for a bonus and 22% of technical staff. There is a median maximum bonus of 11% of salary for directors in the public sector and 8% for junior managers.
Despite the seemingly high bonus payouts, levels fell well short of maximum potential payouts in 2013 and even seemed to struggle to reach “on target” levels.
“The picture appears unlikely to change in 2014 as over one-quarter of employers believe bonuses will be lower next year, compared with only one-in-six who think they will be higher,” says Adam Cohen.