PAY AWARDS STAGNATE AS EVEN HIGHER INFLATION LOOMS, FINDS XPERTHR
Posted on 28th August 2022
The latest data from XpertHR shows that the median basic pay award in the three months to the end of July 2022 was 4%, unchanged for the fourth consecutive rolling quarter.
Although pay awards remain at the highest recorded level since September 1992, they continue to trail rising inflation, lagging 5.4% percentage points behind the latest Consumer Price Index (CPI), which now stands at 9.4% as of June 2022.
If inflation hits more than 13% in the fourth quarter this year, as predicted by the Bank of England, and pay awards continue to hold at 4%, pay will lag a sizable 9 percentage points behind inflation. Even at lower inflationary estimates from the likes of NIESR (prediction for CPI to reach 11%), employees will be experiencing a considerable real terms pay cut.
Based on the outcome of 68 pay settlements with effective dates between 1 May 2022 and 31 July 2022, covering almost 550,000 employees, XpertHR also finds:
- Interquartile range narrows. Fewer pay awards at the top of the range sees the upper quartile measure fall from 6% in the previous month to 5% in July. The lower quartile remains at 3%.
- Majority of pay awards are higher than the previous year. Employers continue to give higher pay awards than a year ago, with 85.1% of pay awards worth more than employees received in 2021.
- Manufacturing falls behind services sector. The median award in the manufacturing and production sector, recorded at 3.5%, has fallen behind the figure for the services sector at 4%, having surged ahead in the three months to the end of June 2022.
Large numbers of public sector workers who are covered by the public sector pay review bodies had their 2022/2023 pay awards announced at the end of last month. With many covered by the "pay pause" the year before, the increases mark a considerable uplift for employees, particularly the lowest paid. However, the below-inflation increases could trigger strike action among public sector workers. XpertHR recorded a median 2% increase in the public sector over the 12 months to the end of July 2022, up from 1.4% over 2021.
Sheila Attwood, XpertHR pay and benefits editor, said: "Pay awards continue to remain stagnant, unchanged from the previous three rolling quarters at 4%, in spite of soaring inflation. The latest rise in the Consumer Price Index, and predictions of an 11-13% rise by the end of the year, are both indicators that we are by no means near the end of this volatile period."
"For many employees already struggling with the rising cost of living, the prospect of further inflation hikes, coupled with the energy price cap increasing from October, is likely to cause significant worry. While important, pay increases aren't the only means through which employers can help employees through the worst of the cost of living crisis. For example, offering free financial planning advice or discount packages to employees can help staff manage finances more efficiently and cut the cost of essential products and services."
For more information visit xperthr.co.uk