Budget-Busting Pay in the UK?
Four in 10 British hiring managers are paying specialists more than the budget recommends, new research shows.
Most of the time, corporations budget what managers can spend on salaries for their team. These managers are often left making hard decisions as to who gets paid what. At least that was the way things were when only a few managers tended to break the salary budget.
But fierce competition for key players is changing all that. Indeed, two-fifths of UK hiring managers spend more on salaries than their compensation budget nominally allows, new research shows. In other words, these hiring managers break the corporate-budget guidelines. When 40% of hiring managers are prepared to exceed budgets, rigid salary controls risk becoming disconnected from talent economics, says Tom McMullen, a senior client partner based in Korn Ferry’s Chicago office. “The salary budget then becomes a speed limit everyone ignores,” he says.
It’s happening because some specialist workers demand high remuneration. These specialists are often experts in AI and other tech, as well as lawyers and mergers-and-acquisitions professionals. “The hiring managers have a lot of pressure to get the right types of skilled workers,” says Ian Milton, a Korn Ferry senior client partner in workforce reward for UK and Ireland. Some managers think that if you don’t pay talent enough, the company will fall behind; they want to fix this ahead of time. “The tricky bit is the assumption of the uptick in productivity,” he says.
If managers are routinely breaking salary budgets to win talent, reward strategy is already being rewritten, says McMullen. “The only question is whether HR/Rewards leads the rewrite or simply approves the exceptions in pay.”
Fifty-three precent of hiring managers recently surveyed expect pay levels to increase in 2027, both to retain highly skilled workers and also to offer fair remuneration to potential candidates. Retaining skilled staff can be tricky. “These are the individuals who have a sense of what they are worth,” Milton says. “And they can jump.”
Having different pay for different classes of workers can create an internal equity problem, McMullen says. Human resources should monitor new-hire premiums versus incumbent-pay positioning. “If they don’t, they will find the fastest way to solve a recruiting problem can often create a retention problem,” he says.
If talent scarcity is driving pay premiums, organizations might want to consider sign-on bonuses, skill premiums, retention awards, and other targeted mechanisms alongside permanent base-pay moves, McMullen says. But who is considered a skilled worker tends to change quite rapidly, and if that worker has an inflated base salary, it will rarely be reduced. “Instead, it might be better to pay a skill premium, but don’t blindly bake it into the base salary,” he says.
Milton says hiring highly skilled workers could work if, in addition to their normal workload, they also pass on their expertise broadly within the company. “Now that we have them, what can we do with them to build you the best people in the workforce?” he says.
Another approach is to hire skilled experts on a temporary contract that could be for just a few months or a year, experts say. “If we need them only for as long as we need them, we don’t have to worry about long-term planning for those executives,” Milton says. “These experts can boost them.”
McMullen says organizations should stop budgeting pay evenly when talent isn’t valued evenly. That means differentiating between investments according to skill scarcity, business criticality, performance, and retention risk rather than giving every workforce segment roughly the same answer based on broad market conditions. “The future of rewards is asymmetric segmentation,” he says.
Learn more about Korn Ferry’s Total Rewards capabilities.
