UK: Smith & Williamson Survey Reveals Uneven Playing Field

Last Updated: 25 February 2009
Article by Rachel Stone

A new benchmarking survey has revealed a 12% pay difference at chief executive level between similar sized housing association groups and single associations.

Our Housing Association Executive Reward survey, published in December last year, has highlighted a distinct salary gap between senior staff at housing association groups and single associations. It has also revealed a growing trend toward performance-related pay and found that half of surveyed organisations are operating a bonus scheme for their top tier management.

We designed the survey to provide associations with detailed and current information on executive pay. It also acts as a useful benchmarking tool for associations looking to review their remuneration packages for senior employees. The survey data was collected from 232 individuals across 33 associations, representing a spectrum of registered providers, including 6 of the 10 largest organisations.

The survey report analyses the different executive roles, housing association structures and reward packages in considerable depth. The data has also been analysed by seniority of role, gender, turnover, number of employees, units under management, region and job function. The survey focuses on top team posts and analyses total reward packages, including bonuses and benefits, such as holiday entitlement, pension schemes, private medical insurance, company cars, family friendly benefits and use of flexible benefit schemes.

Examining The Gap

It emerged that the average pay for a chief executive of one of the larger groups is £214,038 per annum (p.a.); which is more than double the average for a chief executive of a single association entity, which was £102,428 p.a. This pay difference is not just due to the size of the organisations – the association structure also has a significant influence. Taking an association of £80m turnover, a chief executive of a group structure can expect to command a salary that is 12% higher than if he/she headed a single association entity with the same turnover. This differential also applies at director level, where a group director can expect to be paid 35% more than a single association director.

The survey results also raised the following points of interest.

  • 56% of housing associations have a bonus scheme in place for senior management.
  • Of those, only 60% of chief executives and 41% of directors received a bonus payment in the last year.
  • The average level of bonus is 7.3% of salary.
  • 21% of surveyed associations have a bonus scheme that applies to all staff, while 45% have a scheme purely for their executive teams.

This survey differentiates between group and single association roles, recognising the differences in complexity and management challenge. Because of this, the data provides valuable and accurate insights into total reward at the most senior levels in housing associations.

Pay For Performance

Most associations rely on inflation trends and the retail price index (RPI) to guide their pay decisions each year. However, Smith & Williamson's Pay and Reward team is seeing an increasing desire to link pay more closely to performance.

Almost half of the surveyed associations have no link between pay and performance at present, but a good proportion are keen to change this. We have supported several associations to develop mechanisms which ensure that pay rises are based on merit rather than cost of living. This helps associations to target limited pay budgets at their best performing staff to encourage the recruitment and retention of high calibre people. At executive level, this has usually meant a clear link between achievement of corporate key performance indicators and the level of pay increase for the executive team.

Dramatic Drop In Pay Rises

Smith & Williamson conducted a short follow-up survey in January of this year to see how expectations for 2009 pay rises have been affected by the plummeting economy.

It emerged that the recent economic downturn has had a significant impact on pay budgets in the housing sector, with associations cutting the estimated average pay awards by almost 30% since the autumn.

The highlights from this follow-up survey include the following.

  • The average expected pay increase in 2009 is now 2.5%, down from 3.5% as recorded in the December 2008 survey.
  • The average predicted pay rise is 2.6%, down from 3.8% in December 2008.
  • Responses ranged from no pay increases up to an expected rise of 5.5%.
  • Three associations have already implemented their 2009 pay deals, with average awards of 1.5%, 2.5% and 3.0%.
  • Awards are likely to be highest among associations of £10m to £50m turnover, where the average rise is expected to be 2.8%.

For our Housing Association Executive Reward survey last year, we invited housing associations to respond to a broad range of questions, including a number relating to their 2009 pay review process. The data was collected before the economic downturn, so we felt that their pay expectations for 2009 were likely to have been reviewed and their plans re-shaped. To ascertain how far the pay landscape has changed, we sent an electronic survey to 820 housing associations in the UK asking what they expected their average pay rise to be in 2009.

The survey also shows that the most common month for pay reviews in the sector is April, with 79% of respondents holding their review at this time.

It emerged that some associations link pay awards to the level of the RPI of inflation in the previous September and face making above market awards of 5.0% or more. However, continued use of this formula means that their 2010 awards could be based on sub-zero levels of inflation.

Other associations are taking a pragmatic approach to this year's pay review. One commented that while they had an agreement linked to the 5.0% September RPI percentage, they have met with their trade unions and agreed to implement this increase over two years, with the first 2.5% in April 2009.

Others are linking this year's awards to reviews of existing practices and benefits, such as the introduction of market related pay or the review of final salary pension schemes.

We provide a tailored pay benchmarking service to our clients for all types of roles, using our national databases to provide an accurate picture of pay and benefits. If you would like to find out more about our services, please get in touch.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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