The general consensus of opinion is that the UK economy is on the road to recovery, especially in the small to medium enterprise (SME) sector, the traditional engine room of growth in Britain.
Yet in most cases this has not translated to pay rises for employees, in fact after inflation most employees have experienced a pay cut in real terms .If you combine this with significant increases to household essentials such as utility bills and transport costs this puts a real strain on a lot of employees personal finances.
So it is no surprise that business owners are cautiously starting to earmark a percentage of their budget to reward and retain their loyal staff that have been with them through this difficult period.
Whilst some employees are starting to ask questions about when improved performance will translate into improved pay.
Two Pay Increases
Before an employer increases pay they need to factor whether this will translate into higher workplace pension costs (as part of the auto enrolment legislation). For those employees already in a scheme then in most cases increased pay will mean increased pension contributions.
For those employees not in a scheme it may take them above certain earning thresholds. Changing your responsibilities as an employer. For example increasing a 25 year old malesâ€™ pay from Â£8,500 to Â£10,500 per year would require them to be automatically enrolled (based on current legislation as at June 2015) and as such creates the need for a pension contribution as well as a pay increase.
Anecdotally I have observed a trend for some or all of a pay increase to be passed on as a pension contribution rather than as increased take home pay. This requires a fundamental shift in employer and employee thinking about what pay is.
â€œTotal payâ€ is more than what goes into a bank account at the end of the week or month for example it can be made up of salary, pension payments, free parking and private medical insurance.
Finally it is worth noting that auto enrolment is not business as normal for most SMEâ€™s, it requires a root and branch review of payroll, human resources and the role of key business advisors (such as accountants and financial advisors). This review entails time and money being invested wisely to get the job done on time and on budget.
This blog is updated from the attached article; http://www.employeebenefits.co.uk/benefits/pay-/-bonus-and-reward/auto-enrolment-hits-pay-rises/105471.article
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