Pay Increases

[woolleysheep]

is it fair that pay creases are given as a percentage when the lowest paid get the least and the highest paid get the most

[woofgang]

yep.

[bednobs]

yes

[EcclesCake]

Yes, it's proportionate.

[Old_Geezer]

Yes. Because it retains accepted differentials. (Everyone experiences the same % inflation.) Whether the differentials are fair is a separate matter.

[fiction-factory]

If it's any consolation the highest paid will lose 40 or 45% of their increase to the taxman (plus some NI)

[ToraToraTora]

yes because taxes are also paid in percentages.

[woolleysheep]

someone on £300 per week 2%= £6
---------- on £600 per week 2%= £12

[fiction-factory]

Yes (before tax)

[Old_Geezer]

Precisely. And fair because onver the past 12 months both have found that their salary from a year ago buys less. In the case of the higher paid, about £12's worth less than it did, in the case of the lower paid about £6's worth less than it did.

[Old_Geezer]

OVER !

[woolleysheep]

tax @ 20% on £6 =£1.20
tax @ 20% on £12=£2.40

[bhg481]

Look at it over a long period. When I first started work in the 1960s I was paid around £400 per annum, my boss was paid around £800 per annum ie about twice as much but £400 per annum more.
Go to today's pay and I would be on say £40,000 per annum. Would it be fair for my boss to be on £40,400 per annum ie, £400 per annum more or should he be on £80,000 per annum?

[Old_Geezer]

I get the feeling that you are unconvinced.

£300 is half of £600
£306 is half of £612
So same as before. So fair.

Consider the following scenario.

Someone on £600 a week is considered to be worth twice as much to the company as someone on £300 a week. To be fair that should remain the same after years of inflation and wage rises.

At the start the more valued employee has additional income compared to the less valued one, that allows them to go on a second holiday, eat out once a week, go to the theatre every month. This is the accepted starting position as one employee is worth more to the company and reaps the benefit of that.


If a percentage is used, after x years of wage rises both might find their salary is 100% greater than at the start. The lower valued employee has £600 a week, but finds they can still only afford the same things as they used to at the start. Meanwhile the higher valued employee has £1200 a week, but also finds they can still only buy what they could at the start, which still allows them to go on a second holiday, eat out once a week, go to the theatre every month more than the lower valued employee can.

Both are still in the same situation as they always were. Which is fair. The figures may have changed but the affect is identical.

Now compare this to a different system where the same increase was awarded to all employees.

After x years The lower valued employee finds they have £600. A rise of £300 since the start. Their situation still hasn't changed. However the higher valued employee also only has a £300 increase so gets £900. Which means they have lost out as they can no longer afford the second holiday, and can only eat out once a month and visit the cinema four times a year more than the lower valued employee.

This is clearly unfair as their salary has dropped in real terms, but the company is still getting the same work out of them.

The result is either going to be that the company is swamped with applications for the less valued job positions or can find no one to apply for the higher valued job positions because rival firms attract those capable of filling those roles.

If you have an issue it is with the differentials not the pay rises.

[New Judge]

Also consider this:

Somebody earning £10,000 a year who receives a 5% (£500) pay rise retains £440 (88%) of their increase. (They pay no Income Tax and 12% NI).

Somebody earning £100,000 a year who receives a 5% (£5,000) pay rise retains just £1,900 (38%) of their increase. (They lose £2,500 of their tax free personal allowance, they pay 40% tax and 2% NI on their increase). Effectively they are taxed at 62% on their additional income.

[ToraToraTora]

not sure what your point is woolleysheep, the world isn't fair, is it?

[woofgang]

I suspect that the OP thinks their pay increase should have been more....

[Flonska]

It appears that a similar query was raised by woolleysheep circa 9 years earlier:-

http://www.theanswerbank.co.uk/Business-and-Finance/Personal-Finance/Question582296.html

and it appears not to have been resolved.

[Old_Geezer]

Interesting find. It seems wolley is under the misapprehension that a part percentage and part fixed rise retains differentials, whereas it would erode them, albeit more slowly.

[Prudie]

These increases across the board are to go somewhere towards compensating for inflation - not to enable the lower paid to rise up the payscale or narrow the gap between lower and higher paid.

[Quizproquo]

Yes it's fair.
What's not fair is when the poorest get a MAXIMUM of 1 % and others get, let me just pluck a figure out of the air here, 8%