Mind the (pay) gap!

The pay gap between lower level workers (comprising skilled manual, clerical, supervisor or graduate entry jobs) and senior managers (heads of departments or equivalent) is now on the rise in twice as many countries as it is falling (42 to 21), according to the paper.

Ben Frost, consultant at Hay Group, comments: “The job level pay gap has accelerated since the recession. However it is not purely a post-recession issue. This is a trend that has been building for the past 30 years through economic boom as well as bust.”

Frost continues: “Frequently discussed but often misinterpreted, the size of the pay gap can depend upon a number of factors, not least the shape of the company and the types of workers it employs.”

The survey suggests that the pay gap has accelerated as globalisation opened up workforces and lower level jobs are increasingly automated and off-shored. This reduces the number of jobs available and increases competition for those left, keeping pay down.

In contrast, pay is increasing for senior managers where skills such as emotional intelligence, creative thinking and advanced judgement are in high demand and short supply. In addition, senior managers are increasingly being asked to take on more responsibilities and more complex work.

Frost continues: “The potential for a large job pay gap to cause discontent among the workforce is huge. Organisations need to be transparent with employees and communicate why reward policies are in place.

“They should also invest in their training and development programmes to upskill their workforces to meet the future demands of their businesses. Done properly, these solutions present an opportunity for organisations to navigate the pay gap and improve employee engagement.”

In the Middle East, pay disparity between senior managers and lower-level workers is relatively high and has widened significantly over the last 7 years. This is due to the increasing emphasis that organisations in the region place on the people to lead their business. Industries are targeting ambitious growth and senior people in various sectors have bigger roles to play.

This in turn has given rise to bigger pay packages at senior levels due to scarcity of resources, while the lower levels have grown at a slower pace. The demand for senior professionals, for whom organisations are willing to pay high premiums, has outstripped the impact of increasing salaries at lower levels due to nationalisation.

The region also employs a larger proportion of expatriates from developed countries in leadership positions, in comparison to developing countries, which dominate the lower levels.

This also has an impact on the difference in salaries as organisations have employed a larger number of Western expatriates in the region since the global economic downturn.