Posted on 3rd December 2020 - INDUSTRY NEWS

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UK private sector workers are set to receive average pay rises of 2.4% in 2021, according to Willis Towers Watson's latest Salary Budget Planning report. As the Covid-19 pandemic swept through the country in March, companies were forced to revise down their pay rise plans, leading to average increases of 2.2% this year.

The number of UK companies expecting to freeze pay is also expected to fall sharply next year, in a further sign of cautious optimism for 2021. This year saw a third (33%) of private sector companies freeze pay increases as they were curtailing costs. But this is expected to fall to just over 3% of companies in 2021.

Keith Coull, senior director in Willis Towers Watson's Global Data Services business, said: "After a difficult year for employers and employees - battling lockdowns, employee safety issues, working from home and declining revenues - many employers are finding ways to handle the crisis better, manage their businesses and help their employees with a more focused work and reward strategy.

"Many companies are looking ahead to 2021 with cautious optimism, which is reflected in slightly higher pay rise budgets than we saw this year."

A similar picture is emerging across Western Europe, most organisations in the major economies anticipating higher pay rises in 2021 than this year. The largest increases are expected in The Netherlands (2.5%) and Germany (2.4%), followed by Italy (2.1%), France and Spain (2%).

Different industries have experienced differing fortunes during the pandemic, and that is reflected in anticipated pay rises for 2021, with some expecting to take longer to recover that others. The most pessimistic industries in the UK are Leisure and Hospitality, offering just 1.4% average wage increases in 2021, Construction, Property and Engineering (1.8%) and Automotive (1.9%).

This contrasts with the industries that are most optimist about next year's prospects including Insurance (2.9%), Fintech (2.8%) and Business and Technical Consulting (2.8%). Perhaps surprisingly Retail is also among the industries expecting the highest pay rises in 2021, at 2.9%, which may be a reflection on buoyant sales for some online retailers, and a reaction to the high number of pay freezes (48%) taking place this year at others.

"Not all industries have been impacted in the same way. While many technology and banking firms have been successful due to their ability to aid digital acceleration and financial liquidity, companies in the hospitality, leisure and airline industries have suffered. The differences in how companies were impacted by the pandemic are likely to be heavily reflected in pay rise levels too," said Coull.

"We are also expecting many companies to be differentiating their allocation of pay rises, so that they can provide meaningful salary increases to their best and most valuable talent and prioritise spending on jobs that are likely to contribute the most to success or survival next year."

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