The Labour Market In The UK
With more than 67 million inhabitants, the United Kingdom has a highly developed social market and market-oriented economy. It’s the sixth-largest national economy in the world measured by nominal gross domestic product and constitutes about 3.3% of world GDP.
The United Kingdom is one of the most globalised economies, comprising England, Scotland, Wales and Northern Ireland. In 2020, the UK was the fifth largest exporter in the world and the fifth-largest importer. The service sector dominates, contributing 81% of GDP, while the financial services industry is also of particular importance, with London ranked as the second-largest financial centre in the world.
SMEs account for the vast majority of the business population (from a total 5.5 million businesses), accounting for three fifths of the employment and around half of turnover in the UK private sector. As of July 2022, roughly 32.8 million people were in employment, giving the UK one of the lowest unemployment rates within the EU.
Unemployment rate in the United Kingdom
Collective Labour Agreements In The UK
Only a minority of employees in the UK are covered by collective bargaining, with private sector employees (where the key bargaining level is the company or the workplace) much less likely to be covered than those working in the public sector (where industry level bargaining is more important).
Collective bargaining is much more prevalent in the public than in the private sector, where about 90% of employees were covered by some form of CLA compared with 21% in the private sector and 50% in the smaller non-profit sector.
When bargaining occurs in the private sector, its most important level is at the company or individual workplace, covering more than three quarters of private sector employees, whose pay is set through collective agreements.
Industries where a high proportion of employees are covered by company-level agreements include the privatised utilities, gas, electricity, water, telecommunications and finance sectors. Agreements at workplace level are more common in manufacturing, like in engineering and food manufacturing, where many companies have separate agreements for each of their production sites.
Wage Setting In The UK
In the United Kingdom, wage setting is primarily a decentralised process, with employers and employees negotiating wages and benefits through collective bargaining or individual contracts. The UK government sets a national minimum wage, which is regularly reviewed and increased to ensure it keeps pace with the cost of living. The national minimum wage applies to all workers over the age of 25, and there are separate, lower minimum wage rates for younger workers. Some industries, such as agriculture and domestic work, have exemptions from the national minimum wage legislation. Additionally, certain sectors, such as construction and retail, have established trade unions that negotiate collective bargaining agreements with employers on behalf of their members, setting wages and working conditions.
Pay and conditions of most employees in the UK are not collectively negotiated. Figures from the UK Office for National Statistics (ONS) show that around 40% of employees had their pay set and working conditions set through collective bargaining, which predominantly takes place at the local or company level.
Additional information on wage and salary increase budgets can be found in surveys such as Culpepper’s Global Salary Budget & Compensation Planning Survey.
Compensation Surveys In The UK
Compensation survey results in the United Kingdom provide insights into jobs and their salaries. Pay market data helps employers determine and design their own compensation strategy.
Finding fair and competitive compensation for employees in United Kingdom does not necessarily have to rely on compensation survey market data, but may also be derived from above mentioned labour agreements, which will provide employers with insights into quantifiable aspects of compensation such as base salaries, job tenure based increase percentages, starting salaries, allowances and benefits, holiday entitlements and working hours.
The market for compensation surveys in the United Kingdom is relatively mature, there are the Anglo-American vendors, as well as some local vendors such as Croner and Cendex by XpertHR with employer sourced data.
The gradar Solution
For companies looking to gain more clarity over their compensation, combining information from labour agreements and market data - supplemented by an internal analysis - makes a lot of sense. gradar is the tool by which to do it.
With our foundation in point-factor based job evaluation, alongside our comprehensive compensation benchmarking functionality, we allow you to establish fair, transparent pay structures under one roof in one consolidated system.
Market data from third-party compensation survey providers can be uploaded to your gradar account - or even purchased as an out-of-the-box feature. Just purchase your gradar licence and pick the data sets you want - it’s that simple!
Data for Base Pay and Target Total Compensation is then displayed on your job profiles and as a detailed report. The system uses the benchmark job code from our job matching module to display job specific benchmark data.
This is the most affordable way to perform a salary comparison against market rates worldwide - and structure effective remuneration systems that set salaries at the most appropriate level.