Pay and reward covers all benefits an employer offers its employees
There are certain legal requirements concerning pay which all employers must meet, including equal pay, the national living wage and the national minimum wage.
In addition, an attractive and economically viable pay and reward system can have a positive impact on recruiting new staff, engaging employees and encouraging loyalty.
Pay and reward covers all benefits an employer offers its employees, including financial benefits such as wages, pensions, paid leave and sick pay; and non-pay benefits such as appraisals, flexible working, opportunities for development and ongoing training.
The most effective pay and reward packages are aligned with the needs of your business.
Attract, retain, inspire
Employers should find out what attracts, retains and inspires individuals within their industry or organisation and explore how they can meet the wants of their employees while operating within a legal framework.
Pay and reward strategies should be supported by communication with employees so that they are aware of the behaviours and performances being rewarded, how they will be rewarded and why they are rewarded.
Pay is one of the most important factors of an employment relationship. Businesses must pay their employees in line with the law and their contract of employment.
The challenge for most companies is to set consistent pay levels which give value for money to the organisation while rewarding employees fairly.
Organisations sometimes use pay scales to determine the wage a worker is entitled to, based on their performance, competency, qualifications or skills.
Employees generally move up the pay scales as they develop their skills and improve their performance, which can motivate and engage staff.
Occasionally disputes about pay arise, and when they do, it often has a negative effect on staff morale and productivity.
Organisations should make every effort to resolve any disputes internally, to avoid the problem escalating and being referred to an employment tribunal or court case.
Understanding your legal obligations and pay processes can help avoid mistakes occurring in the first place, and enable you to resolve any issues concerning pay swiftly.
The law concerning pay and reward
By law, employers must pay their employees either the National Minimum Wage or the National Living Wage.
The National Minimum Wage (NMW) is the hourly wage which applies to workers between the ages of 16 and 25, and varies according to the age of the employee.
Employees aged 25 and over are entitled to the National Living Wage. The NMW rate usually increases each October and there are no exceptions for small businesses. Apprentices are entitled to a separate National Minimum Wage which is not governed by their age.
Employers are also legally obliged to do the following:
- Provide an individual written pay statement
- Provide payslips on or before the pay date
- Specify amounts and reasons for any deductions
- Pay part time workers the same rate as full time staff
In addition to these legal pay requirements, organisations must pay their staff in accordance with contractual agreements. A contract of employment between you and an employee is a legally binding document, and therefore its terms should be upheld by both sides.
Offering additional pay for overtime can motivate staff to work more hours, and if this is a benefit you wish to offer your employees you should ensure overtime pay rates are clearly outlined in their contract of employment.
Although there is no legal obligation to pay your employees for working overtime, you must still ensure the total hours they work meet the National Minimum Wage or National Living Wage requirements.
Equal pay and the Equality Act 2010
In some circumstances, you may decide that a worker with more experience or qualifications should start at a higher point in the pay scale. Although this is permitted by law, you should consider whether the action may be seen as discriminatory.
Organisations must give men and women equal treatment in the terms and conditions of their employment contracts if they are employed to do:
- Like work – work which is the same or broadly similar
- Work rated as equivalent under a job evaluation study
- Work found to be of equal value in terms of effort, skill and decision making
Equal terms can cover all aspects of pay and benefits, including basic pay, overtime rates, performance related benefits, hours of work, access to pension schemes, non-monetary terms and annual leave entitlements.
If an employee has concerns that they are not being paid equally, employers should attempt to resolve it informally in the first instance, and through internal grievance procedures if necessary.
Employees can also complain to an employment tribunal under the Equality Act 2010 if no resolution can be reached within the organisation.
It is important to ensure your employees are rewarded fairly, as organisations can be forced to conduct an equal pay audit and publish the results if they lose an equal pay claim.
How PeoplePointHR can help
It is important to get your pay and reward strategy right to motivate your staff, encourage staff loyalty and avoid potential disputes.
Our team of employment law experts and HR specialists are able to offer sound advice and support on creating a pay and reward package which works for both you and your employees, as well as meeting legal requirements.
Our pay and reward services
We can assist you with:
- Reviewing the effectiveness of your pay system and implementing new pay and reward strategies
- Devising new incentive schemes including profit share/share options
- Conducting Equal Pay Audits
- Introducing competency, skills based and appraisal related pay
- Training you to evaluate different pay systems, effectively implement a new pay and reward system and avoid discriminatory pay systems
To learn more about pay and reward strategies contact us today on 0330 555 2555.