April has brought about a pay rise for those employees on the National Minimum Wage and the National Living Wage.
But what about everyone else? Are your other employees due a pay increase too?
There is no statutory obligation imposed on employers to increase an employee’s pay every year and if an employer decides to do so, it is subject to their discretion as to how much the rise will be. Employers may decide to give all their employees X increase (e.g. 3%) or base it on their individual, team’s or business’ performance throughout the year.
Pay rises are a useful tool for employers because they can help retain your key talent, but there are a number of things to be aware of.
Be careful what you say (and don’t say) in the contract
The majority of employees’ contracts will state that salary will be reviewed annually, but it is important to stress that a pay review does not automatically translate into a pay rise.
If the contract does confer a right to an annual pay rise and you do not give them what the contract lays down, you will be considered in breach of the contract which can lead to costly Employment Tribunal claims.
Even if the contract is silent, you may be obliged to provide a pay increase if you have been giving employees an annual pay increase over a number of years. This is because a long-standing or established custom or practice may become an implied term of the employee’s Contract of Employment. In general, this will be the case where the practice
- is clear and certain
- is fair and reasonable
- has been going on for a long period of time (the law does not set out a specific length of time)
- is known to employees and they have a reasonable expectation of receiving it
- has been consistently applied to employees.
Consider alternatives to pay rises
Not all employers can afford a pay rise, but this doesn’t mean that you can’t offer your employees other types of incentives to stop them looking for roles elsewhere. For example, could you allow them to work from home one day a week in order to cut down on commuting costs? Could they have an extra day of annual leave or could you provide a higher contribution to their pension? These types of arrangements are often more cost-effective for the employer and can be very appealing to the employee.
To discuss this matter further, get in touch with you Employment Law Adviser who can offer you guidance.