Fewer redundancies and resignations as labour turnover tumbles

31 March 2011

Postcode lottery in pay persists with average inner London salary twice that in Wales

New figures released today show a decline in labour turnover over the past year, with fewer people resigning, being made redundant and retiring. Data collected from 34,744 individuals in 353 UK organisations reveals a labour turnover rate of 10.5 per cent, down from 12.3 per cent a year ago. The 2011 National Management Salary Survey, published by the Chartered Management Institute (CMI) and XpertHR, also shows an average salary increase of just 2.2 per cent for the 12 months to February 2011 – the lowest pay rise for more than a decade.

At 3.9 per cent, the proportion of people resigning has dipped to a five-year low, suggesting that executives are happier in their current roles and more determined to ride out the current economic uncertainty than they were 12 months ago (when resignations stood at 4.7 per cent). The figures show that just 2.2 per cent of executives and professional staff were made redundant over the last 12 months, compared to 3.6 per cent the previous year. Employees are also less inclined to seek internal transfers than they were a year ago, with only 3.4 per cent moving roles within their organisation in the past year, down from 3.6 per cent in 2010.

During a period of turmoil regarding pensions and changes to the default retirement age legislation, the survey also shows fewer people are retiring. Just 0.2 per cent have chosen to quit the workplace for good in the last 12 months, compared to 0.9 per cent last year.

The survey indicates that these signs of loyalty have been rewarded with a small rise in pay of 2.2 per cent – the lowest salary increase in more than 10 years. This is down from 2.5 per cent in 2010, 4.9 per cent in 2009 and 5 per cent in 2008. In real terms, the findings show an average salary of £36,413 for all executives across the UK, rising to £47,021 for those working in inner London and falling to just £23,857 in Wales.

Analysis of the data shows junior staff have enjoyed greater reward (2.3 per cent) for their efforts than their managerial colleagues (2.1 per cent). At 4.2 per cent junior staff in the South East benefitted from the highest average increase across the country and their pay rise dwarfs the highest increase enjoyed by managers (3.3 per cent, also in the South East).

At market entry level, the best paid junior executives, excluding London, are based in the South West. Bringing home an average of £18,012 per year, they earn £2,264 more than the lowest paid junior executives, living in the North West. Amongst the management community, department heads in the South West are most highly rewarded, earning an average salary of £64,586. Their annual income is £8,813 higher than the annual salary earned by their counterparts in Northern Ireland – which, this year, is home to the UK's lowest paid department heads.

The survey, now in its 38th year, suggests that the salary postcode lottery extends across all levels of seniority. Directors in the Midlands, for example, earn an average of £136,638 and this compares to £120,942 for their counterparts in the North West. The basic salary of junior managers in Scotland is £34,521, yet for individuals doing the same job in the South East, average salaries are £36,834.

Ruth Spellman, chief executive of CMI, says: "It seems that UK employees are more content to stay in their current jobs. Despite increasing demands on time and pressure to deliver more for less, employees have retained some sense of loyalty to their employers and their efforts are being noticed.

"It's reassuring that employers have been able to offer modest pay rises, something we hope indicates that the era of pay freezes may be about to thaw. Of course, no one should believe that the only way to retain employee loyalty is by throwing money around. It's not practical in the current climate and wider evidence exists to show that money is not the main motivator. What is clear, however, is that employers appreciate that they can influence labour turnover and reduce the churn of staff they want to hold on to."

Mark Crail, head of salary surveys and HR benchmarking at Xpert HR, says: "It's encouraging to see a shift in attitude, even if the movement is still small. Employers do, however, need to look beyond pounds and pence to reward their staff appropriately. Remuneration is, after all, about the complete package – pension contributions, annual leave and the opportunity to develop skills are all high on the employee agenda. They may still have a cost associated to them, but as a way of building staff loyalty, may be better viewed as an investment."

CMI has launched a salary calculator allowing individuals to compare their annual pay rise against the national average (www.managers.org.uk/salarycheck). Answers to frequently asked questions relating to pay, rewards, performance and training on a budget are also available at www.managers.org.uk/practical-support/common-management-problems.

Please view CMI statistics on 'earning power in the UK'

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