Two-thirds of UK employees are now saving into a workplace pension following the introduction of auto-enrolment pensions, according to the latest CIPD Employee Outlook (EO) research.
However, seven out of 10 employers told EO researchers that the rise in pension take up has put them under financial strain, prompting them to consider how to mitigate future costs such as the introduction of the national minimum wage.
EO researchers questioned more than 2,000 employees to reveal that 66 per cent of them now save into a workplace pension, which is a rise from 45 per cent in 2010. The CIPD said that the percentage of savers increases to 74 per cent if people earning less than £10,000, who are not eligible for automatic enrolment, are excluded.
The survey found that 15 per cent of employers had managed the cost by paying the minimum rates required under auto-enrolment rules. Organisations also countered costs by reporting lower profits (21 per cent), reducing or freezing wage growth (10 per cent), or reducing other elements of pay (10 per cent).
But the CIPD report suggested employers could be taking a different approach to handling the cost of automatic enrolment, and other impending schemes such as the national living wage set to come into force this April and the apprenticeship levy in 2017.
It said that improving employee productivity could be the key to increasing pension contributions without making reductions in other areas of the business. Of the 32 per cent of employers who increased salaries by more than 2 per cent in 2015, 28 per cent did so because they had made productivity improvements.
As pay budgets have been small over the last decade, it is increasingly difficult for employers to reflect employee achievement via pay rises. To resolve this, the report suggested skewing employee rewards towards high-achieving employees. But, it warned, this approach could have negative consequences for employee relations as average performers would see their rewards reduced and redirected to a smaller number of high achievers.
However, the report maintained that small organisational changes to help staff be more productive, such as offering more access to flexible working and redesigning jobs, could make a significant difference in the future. So far, just one in eight employers have taken steps to review working practices and job design to increase performance, with even lower figures for SMEs.
Charles Cotton, CIPD performance and reward adviser, said: “While many ways of boosting performance may now only be marginal, especially in sectors subject to legal requirements, if employers can make enough small changes then they can really boost their productivity.
“What all employers need to do is review the way their organisation operates, and identify the areas where improvements can be made, before deciding the task is too great.”