Shock therapy

Three years ago, staff at Home Group signed a deal that links their annual pay rise to inflation. They get extra pay in proportion with the retail price index of the previous September. It’s an equation that means this year they received a pay increase of 5 per cent, despite RPI having dropped to zero this month.

As our snap survey shows, Home Group staff should be celebrating, having bagged what will probably be the most generous annual pay rise in the sector. As our sample of pay rises shows, any reaction in the face of recession is possible, from a pay freeze to a generous deal. Housing associations are experimenting with different pay levels to balance saving money with keeping employees happy.

One creative option revealed by our exclusive survey, which will save money and yet reward frontline staff, has been adopted by Home. More than 100 of its senior managers are waiving the bumper pay rise. The landlord is reluctant to comment further on the award, but describes the restraint shown by senior managers as ‘admirable’ in the current economic climate.

Its decision is not unique. At West Kent Housing Association, employees earning more than £40,000 are receiving a 2.2 per cent rise - 1 per cent less than the rest of the association.

As she explained in Inside Housing earlier this year, West Kent chief executive Barbara Thorndick hopes the decision of better-paid employees to take a lower rise sends a message to staff that ‘we are not protecting our position at their expense’.

Housing associations generally aim to increase pay in line with the cost of living. This year, the picture is confused by the recession and the fact that, while the RPI fell from 5 per cent to 0 per cent between September 2008 and February 2009, the consumer price index, which many see as a more accurate guide to inflation, stands at 3.2 per cent.

According to Anne Elliott, managing director of HR consultancy EMA, housing association staff fared better if their pay rise was agreed before the end of 2008, when the norm was about 3.5 per cent. ‘Since Christmas, I’ve been to more remuneration meetings where they’re settling at 2 per cent to 2.5 per cent. There are examples in the south and midlands where staff aren’t getting anything.’

A survey of 87 associations by accounting firm Smith and Williamson, published in February, found that the average expected pay increase in early 2009 was 2.6 per cent - down from 3.8 per cent last September.

Mike Short, national officer for the community and voluntary sector at Unison, says many housing associations only start talking about the annual pay award in April - partly because they wait to discover whether they will receive an ‘uplift’ in contracts with local authorities.

But discussions within the union’s national housing forum suggest hefty rises will be few and far between. ‘The feeling we are getting is that we are going to be looking at very low increases or pay freezes,’ says Mr Short.

Experimental framework

Unison is angry that some associations have suggested suspending incremental pay increases (where individuals move up a pay spine annually as well as receiving cost-of-living rises) for 12 months. Others are considering moves to new spot salary systems, where people receive the same pay regardless of experience.

East Thames has begun talks with unions over a new pay framework which, the landlord claims, will better reflect the contribution of employees.
‘We’re trying to get away from the idea that people move up a spine simply by being here,’ says Francesca Okosi-Arimah, director of support operations. As a result of the proposed changes, East Thames has yet to announce a pay award for 2009/10.

But there is a shake-up going on throughout the sector, as our survey shows. No clear pattern has emerged among the associations that have agreed an award - it seems that anything is possible.

In the same way that annual rent increases are calculated using a formula that is based on the RPI six months earlier, social landlords such as First Wessex and Home refer back to earlier rates of inflation. But others start the year with a clean slate.

Guinness Northern Counties agreed a 2 per cent rise with its staff council at the end of February. Lisa Burns, an executive director, says it was based on a range of factors, including inflation, the performance of the organisation, and the performance of staff against its business plan.

‘We look at all the various government indices, where our rents are set, and then we take account of the overall situation, and the fact that it’s very unpredictable,’ she says. While inflation is falling, the housing association acknowledges that energy prices in particular have risen considerably. ‘People have experienced cost increases in their own lives,’ Ms Burns adds.

While two or three-year deals can create certainty for employers and staff, Ms Burns is not in favour as it could mean having to break a deal that was made for ‘sound business reasons’ up to two years earlier. ‘You never know what inflation is going to be. These things can go up as well as down.’

Sue Chalkley, chief executive of Hastoe Housing Association, says it was ‘prudent’ to reflect the current RPI and freeze pay for 12 months, although some staff may receive performance-related bonuses at the end of 2009. Such an approach, she adds, ‘reflects our continued commitment to managing our finances in a mature and responsible manner’.

Bombarded

Many employees, of course, will be less concerned by the pay rise they receive this year than whether they still have a job. A recent study by consultancy Baker Tilly found that one in five housing associations cut staff last year, and approximately one quarter left vacancies unfilled or redeployed staff to alternative jobs.

Inside Housing’s snap survey shows that while associations such as Places for People are in the throes of major reorganisation and making substantial job cuts as part of that, other associations have also made staff redundant (see box, page 21 ). These are still in consultation, so they haven’t gone public with exact numbers yet.

However, rising unemployment in the wider economy is widening the pool of potential staff for associations wishing to recruit. Chan Abraham, chief executive of Luminus, says his association is being ‘bombarded’ by speculative applications from people looking for jobs. ‘It’s enhanced our capacity to recruit the people we want,’ he says.

East Thames received more than 50 applications when it advertised for a head of facilities management, and 74 for its head of marketing post. Francesca Okosi-Arimah is delighted by the quality of would-be staff and puts a positive spin on the upswing: ‘People are choosing to come into our sector because of the impact we have on people’s lives.’