Pay and retention: For richer, for poorer

Posted on 7 May 2013 by The Manufacturer

Is your employer doing justice to your talents? Or do you feel tempted to move on to a company which does more to keep you happy? James Pozzi finds out which companies and sectors are seen as the most rewarding work environments for today’s engineers.

A skilled individual committing to a career in manufacturing will benefit from an industry currently paying 12% above the cross industry average – yet remuneration of executives running manufacturing companies remains a divisive subject according to new data from Michael Page, an industry recruitment firm.

Executive salaries in manufacturing rose by 4.6% last year but meanwhile, Michael Page finds that the manufacturing industry lacks confidence in employer ability to retain top talent. Fifty six per cent of respondents to the recruitment firm’s survey felt their company isn’t doing enough to keep the best people, up 12% on 2012’s results. It’s a lack of faith which may come to a head next year when it becomes compulsory for companies to have binding votes on executive pay every three years.

Let EEF take the hard work out of benchmarking your pay

Understanding what to pay employees is a challenge for companies but, for manufacturers, help is at hand.

Manufacturers’ organisation EEF, who research and provide pay data in the sector, have a series of pay reports designed to assist HR professionals and those making pay decisions.

The pay benchmark series are a well-respected set of benchmark reports that deliver salary information from shop floor to top floor. The Workforce Pay Benchmark is the starting point for those interested in gauging the market rates for manual employees and staff workers up to supervisory level. This detailed report gives a job by job breakdown of basic and total pay rates at a national and regional level.

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On a more positive note, 79% of companies questioned said they expect to issue staff salary increases this year and 60% anticipate paying bonuses. The willingness to plan such largess is perhaps linked to a decrease in companies planning to increase headcount. Forty seven per cent said that they will do so in Michael Page’s 2013 survey, a drop of 12% on 2012.

But some sectors have less need for caution. The resurgent automotive and aerospace industries are recruiting strongly, buoyed by heavy investment and increasing demand. Meanwhile, the energy sector and its emerging renewable and bio-technology industries are expected to grow substantially in the next decade.

“Pay is certainly still an important factor. But incentives such as share ownership; pension schemes; health care options; and childcare options are having an increasingly important role in attracting talent” – Philippa Oldham, Head of Transport & Manufacturing, Institute of Mechanical Engineers

The top three jobs in demand across all three sectors are technical managers, process and quality engineers. Around 40% of manufacturing jobs filled by Michael Page last year were in production and operations. At the other end of the scale, the traditional heavy processing industries, particularly print, are finding it hard to attract people due to fears of long term viability. Defence, a victim of the biggest government cutbacks since 1991, has also inevitably taken a hit, with work drying up for contractors across a variety of sectors.

Top payers

A positive working environment is the key to retaining staff
A positive working environment is the key to retaining staff

In the pay leagues, the oil and gas sector comes out top – even beating the finance and utilities sectors – as payer of the UK’s highest median salary.

This is leading to increasing numbers of engineers flowing into the lucrative petrochemical production sector. Average starting salaries for a petroleum engineer range from £29,000 – £36,500 and in some cases this can double within as little as four years.

At executive level, the rewards for those working in the oil and gas sector are by far some of the greatest in industry and across sectors – a potential cause for controversy, as BP found last year when shareholders revolted against a board decision to pay CEO Bob Dudley a £4.3m remuneration package.

Colin Monk, managing director of Michael Page Engineering & Manufacturing stresses that in the current climate it is important for manufacturers to foster a culture of fair play and recognition across pay scales.

“Manufacturers are well aware of the disincentives to their work force on the shop floor if packages seem unreasonable,” he said – and if they are not, they need only look to such recent union disputes as that which took place at Oxfordshire-based chocolate manufacturer Barry Callebaut in September last year, to see how sourness over unbalanced reward schemes can escalate into potentially disruptive unrest. The company saw a profit jump of 13.3% in 2011 and generously increased top level pay in response. Lower tier workers however, many of them members of the union Unite, received relatively paltry increases and strike action ensued.

Money isn’t everything

Monk also identifies a growing interest in developing management internally, often from diverse engineering backgrounds, rather than recruiting career executives – as some labelled Michael Clarke, managing director of Premier Foods up until January of this year – to lead for short bouts. Clarke spent just 18 months in his post, but picked up a reported £2.7m for his contribution to improving performance at the struggling food manufacturer.

But many engineers are not hungry for executive stardom according to Michael Page’s survey. An overwhelming number (56%) of respondents said a positive working environment was the decisive factor in staying with a company, above promotion opportunities (17%) and salary increases (12%).

79% of employers expect to pay salary increases this year
79% of employers expect to pay salary increases this year

The fact that salary is not always a driving factor behind recruitment can play into the hands of SMEs, who might otherwise be unable to attract talent over the head of large firms which often pay twice as much for equivalent jobs.

Sarah Spencer, manager of IT & engineering permanent divisions at another recruitment firm, Progressive Recruitment, explains how. “It’s about the message SMEs send out. If it’s one of growth, innovation, creativity and being agile, that becomes an attractive proposition. Furthermore, in larger companies, movement is very slow, while SME’s can offer any prospective employee the chance to be a big decision maker.”

Philippa Oldham, Head of Transport & Manufacturing at the Institute of Mechanical Engineers (IMechE) digs further into the alternative rewards companies can offer in lieu, or in addition to attractive salaries in order to compete for and retain talent.

“Being based in Scarborough we are quite remote, so attracting smart and talented people is extremely hard”Alan Pickering, managing director, Unison

“Pay is certainly still an important factor,” she says. “But incentives such as share ownership (p48); pension schemes; health care options; and childcare options are having an increasingly important role in attracting talent.”

For many manufacturers though, talent concerns remain at the fundamental level of education quality and sector image, rather than being defined by their ability to compete with other companies for promising individuals.

Alan Pickering, managing director at North Yorkshire based manufacturer Unison, doesn’t feel enough is being done to ignite interest in the industry during a young person’s formative years, thus depriving it of the employees who go on to become executives in more alluring sectors.

Iain Maxted, Guardian Global Technologies
Iain Maxted, Managing Director, Guardian Global Technologies

Industry response

Iain Maxted, managing director, Guardian Global Technologies shares his own experience of SME pulling power for engineering capability.

“We’re a small company and we have to pay small company salaries. I’ve lost my senior mechanical design engineer to a large defence contractor.

“They offered him a job, he accepted and we offered to match the salary, which was around £6k more than he was on. He agreed to stay, before they upped it again.

“My belief is it was because they were on a cost plus contract, so they needed somebody and didn’t care what they paid to get him. This is an area which causes very specific recruitment and retention problems for small private companies – the big organisations can pay whatever they need to.”

Pickering, whose company supplies tube bending equipment and services says “Being based in Scarborough we are quite remote, so attracting smart and talented people is extremely hard. The best we can hope for is an inspired local person to groom in any of the engineering disciplines we need. This ranges across electrical, software, design and CNC.”