Median pay rises are set to reach 5% in the 12 months to the end of August 2023, a level not seen since 1992, a report from XpertHR has forecast.
The median basic pay award in the three months to the end of September 2022 is 4%, unchanged for the sixth rolling quarter, found the study, with nine in 10 employees (91%) set to gain a pay rise next year.
Organisations are under pressure to increase the value of their pay awards to counter the impact of inflation and keep up with the labour market – with 89% saying the increase is in response to the cost-of-living crisis, meanwhile more than three quarters (78%) attribute it to skills shortages.
However, there are also a number of factors that could pull pay rises in the other direction. More than half (53%) of organisations say there is at least one factor that would be a negative influence on pay award levels and of these, one-third (32%) said affordability.
Inflation September 2022
Rise in inflation adds to pay pressure on employers
Based on responses from 323 private-sector organisations, XpertHR also found:
- Wider spread of deals around the median. Predicted pay awards over the coming year are worth between nil and 15%.
- The middle half of deals is expected to fall within the relatively wide range from 3.5% to 6%.
- Pay freezes all but melt away. Just 2.5% of forecasts are expected to receive a pay freeze. The majority of these are in the services arm of the private sector.
- Three in 10 pay awards predicted to be worth 5%. A pay increase of 5% is not only the median value but also the most common prediction, with 29.2% of reviews forecast to result in this figure.
Meanwhile, the median basic pay award in the three months to the end of September 2022 is 4%, unchanged for the sixth rolling quarter.
Based on the outcome of 98 pay settlements with effective dates between 1 July 2022 and 30 September 2022, covering more than 1.1 million employees, XpertHR revealed that the most common pay award was 5%. One in six (17%) basic pay awards are set at 5%, making this the most common award, while 14% are worth 4%.
The report also found that the trend towards higher pay awards is continuing. Of a matched sample of 75 pay awards, 85% of employee groups have received a higher pay award than in the previous year. Among the remaining pay groups, 8% have received a lower award, and 7% the same.
Sheila Attwood, XpertHR pay and benefits editor, said affordability would be the key factor in pay rises: “Should pay awards reach the median 5% set out in our forecast they will sit at a level XpertHR has not recorded since 1992. Organisations are under a great deal of pressure to increase pay in line with rising cost-of-living, but while inflation is clearly the most prominent factor likely to push up the value of pay awards, it is affordability that employers will ultimately have to consider when making the final decision.”
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