The UK finance labour market is a key contributor to the economy and is positioned at the frontline of business activity. Characterised by high competition, sophisticated payment structures and complex staff movements, the finance sector continues to experience increased pressure from clients, regulators, and different markets. The impacts of Brexit and Covid-19 have substantially affected the finance sector, making it harder to attract the right talent and increasing costs for technological infrastructure and staff training. Companies have had to revise their pay scales and benefits packages and rely on digital means for recruitment, onboarding and appraisal (Roumpi, 2021). Consequently, UK firms have had to re-examine their reward strategies, considering internal and external factors to remain competitive and attractive.
Internally, organisations may face changes in workforce trends, salary reviews and job classifications that can directly affect the reward system. For example, changes to the UK finance industry brought about by the onset of digital technologies like blockchain have shifted traditional job roles, which must be reflected in the reward system to keep employees motivated and engaged (Crick et al., 2018). In order to incentivise high performance and boost engagement, finance businesses must create a remuneration package that meets employees’ expectations in relation to their psychological contract and perceived value. This includes aspects of fairness in relation to salary, incentive pay and other benefits, and recognition of individual performance.
Externally, organisations may face changes in the labour market, marketplace competition, government regulations and collective bargaining needs. As the UK has voted to depart the EU, there are still unresolved questions surrounding the availability of labour and skilful workers and the likely consequences on the accessibility of the workforce. Additionally, introducing the IR35 legislation in 2020 has resulted in many businesses engaging independent contractors, who may require different compensation packages (Hague & Ironfield, 2023). This has led to competition for highly skilled workers, with the main effects being increased wages and allowances, improved benefit arrangements, and revised incentive plans.
In order to ensure a just and equitable recruitment and recompense environment, many firms within the UK financial industry have adopted psychological contracts. These agreements ensure businesses comply with and observe the pledges they have fashioned to their personnel. Firms must certify that all remuneration is broadcast equitably and fittingly and that staff are not placed at a loss due to characteristics of their negotiating prowess, such as gender, sexual orientation, or ethnicity. Additionally, firms must guarantee that their subjective contracts are up to date and comport with existing employment edicts (Baruch & Rousseau, 2019). For example, initiating the IR35 statutes has notably affected the British financial sector, prompting many businesses to redesign their payment systems to ensure they are per the laws.
