UK employers ready to increase pay in order to keep staff
UK employers expect to hand out bigger pay rises next year, according to a closely watched survey that suggests companies already struggling to recruit will offer higher wages to retain existing staff.
More than four-fifths of private sector employers expect to increase pay at their next annual review, with the median award set to rise to 2.5 per cent in the year to the end of August 2022, up from the previous year’s median of 1.6 per cent, XpertHR, a research group, said on Thursday.
Plans for pay freezes, which became widespread during the pandemic, were confined to a handful of companies and a majority of employees were set to receive a bigger wage rise than they had the year before, the survey of about 200 organisations showed.
A median increase of 2.5 per cent would return pay settlements to their level two years immediately before the pandemic, when earnings growth was finally picking up after a decade of real-terms stagnation.
At present, though, it would not be enough to offset the likely increase in the cost of living, with inflation set to rise higher than 4 per cent in the near term.
The figures add to evidence that the labour shortages reported across many sectors of the economy are starting to fuel wage growth for people who stay in their existing role as well as for new hires.
The data will be closely watched by Bank of England policymakers, who are on the alert for any sign of one-off price rises starting to feed more persistent wage pressures and lasting high inflation.
Sheila Attwood, pay and benefits editor at XpertHR, said increases were driven by “a need to respond to the market, with recruitment and retention difficulties pushing wages higher”, but she added that some organisations were still worried about business volumes and “likely to remain cautious”.
Employers’ forecasts for pay awards were tightly bunched around the median, with two-thirds falling between 2 and 3 per cent, the survey showed.
Employers in low-wage sectors, such as food production and hospitality, where labour shortages have been widely reported, tended to expect pay deals at the upper end of this range, Attwood said, while pay deals in the finance sector were a little below the average for the whole economy.
Pay deals in a range between 2 and 3 per cent would still be lower than the norm in the years leading up to the global financial crisis, suggesting that the current hiring crunch has not yet led to runaway wage growth.
However, Attwood said a much higher proportion of employers than usual planned to raise salaries for some in-demand staff outside the deal they offered to all employees, in order to address skills and retention difficulties. “This isn’t the whole story — there is a lot more going on,” she said.
Pay settlements, the headline increase in basic pay given to an organisation’s employees in annual pay reviews, tend to be lower than the Office for National Statistics’ official measure of growth in average weekly earnings. The latter includes extra elements of pay, such as career progression, and is affected by shifts in employment between higher and lower wage sectors, and by changes in working hours or in the share of employees working full or part-time.
The ONS measure has been heavily distorted by these compositional effects since the start of the Covid-19 crisis, making it an unreliable guide. But the ONS estimated that after stripping out the distortions, annual pay growth lay in a range between 4.1 per cent and 5.6 per cent, already above pre-pandemic levels, in the three months to August.
Published at Wed, 20 Oct 2021 23:01:51 +0000