This year's salary reviews – carrot or stick?
The Imprudent Accountant suggests that generosity around pay might save money in the long term.
With all that has gone on since the start of the pandemic, there is every chance that many of us have ducked the question of salary reviews.
However, thanks to all of the uproar after the government decided to reward key workers in the health service with a 1% pay rise, selling this to them on the back of the news that key workers in other sectors will get nothing at all, the subject could now be back on the table.
Thankfully, accountants do not have to deal with belligerent trade unions – merely talented and highly valuable, sometimes irreplaceable individuals.
The impression I am getting from friends and colleagues in the sector is that while business has not fallen off a cliff, most are looking at lower profits and, by extension, smaller profit shares. In that context, they are only too happy to keep their heads down when it comes to staff remuneration, perhaps hoping that the problem will go away.
In many cases, this might well be a valid short-term strategy. Given all that is happening, most accountants are probably happy to enjoy a quiet life and remain in remunerative employment. If nothing else, the effort involved in trying to find a new job via the Internet and Zoom might be too stressful for many to contemplate.
Over the years, the mantra from partners running practices has frequently been that “times are hard”, even when their profits are growing at rates that inflation would love to match. This is the justification used to keep pay rises somewhere near RPI or, for the less generous, CPI.
My guess is that in 2021, unless partners are called out as the boy who cried wolf, most of their employees will understand that profits really have been hit and might accept a pay freeze. I doubt that too many accountants will be asking staff to cut pay but you never know.
While this might work, there are two conflicting stances that we can take. The short-termist’s view is that we can easily get away with a complete freeze on pay, subject to some minimal increases for trainees as they progress through the ranks and any lucky colleagues who might be promoted.
After all, we are accountants and spend most of our time attempting to cut costs and advising our clients to do exactly the same.
As a variation on this theme, some might be tempted to follow the government’s example and boast about their generosity while offering 1% across the board or possibly a token, one-off bonus to thank staff for all that they have endured.
The more enlightened way of looking at this might be to try and look at the last year through the eyes of your workforce. If surveys are to be believed, they have been working harder than ever although at least escaping the need to commute into the office and, as a result, saving the cost of transport.
While I have little doubt that most would not kick up a fuss if they were subject to a pay freeze, we must all begin to believe that with vaccines coming on stream and apparently having a very positive effect, a greater degree of normality is just around the corner.
This means that if they think a pay review is insulting, some much-needed and enterprising members of staff could be antagonised and decide to move on. If that happens, you will be on the other end of long-distance recruitment process. It is bad enough trying to evaluate a new member of staff when you have the opportunity to meet them face-to-face. Having to carry out this exercise via the internet is even more likely to end it tears, additional expense and much wasted time.
If you take the short-term view and use the stick rather than the carrot this year, do not expect too much sympathy from your most valued members of staff when the ship begins to steady and they identify career opportunities elsewhere.
My guess is that few accountants will be enlightened in what they see as difficult times but, as part of your investment in the future, maybe this is the moment to offer a decent pay rise this year. In the long term, it will almost certainly prove to be a wise decision.