Companies with low pay budgets are utilising pay differentiation practices to reward high performers, according to a recent survey.

The research by Towers Watson found that over a quarter of respondents (28%) were differentiating pay more than in previous years.

Such differentiation was more pronounced in firms with lower pay budgets, who reported offering high performers pay rises twice as large their average performing colleagues.

Businesses with larger pay budgets, by contrast, offer high performers pay rises 67% above the company average.

Chris Charman, a Director in Towers Watson’s UK Rewards practice, said that the professional services company was ‘surprised to see that when budgets were more generous, the focus shifted to market alignment rather than on to high skill or high potential employees’.

‘Arguably, more value could be derived from retaining and engaging those with scarce and critical business skills or those who could potentially be tomorrow’s leaders,’ he said.

To learn more about your potential earning power, read our article summarising the salaries of graduate jobs in 2013.

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