Pay continued to grow at a rapid rate in the last three months of 2022, driven by record private sector growth. However, when adjusted for inflation employees’ pay packets fell at a historically significant rate, according to labour market figures.
Growth in regular pay excluding bonuses was 6.7% in October to December 2022, which was the strongest growth rate seen outside of the Covid-19 period, the Office for National Statistics (ONS) said. Average regular pay growth in the private sector was 7.3%, whereas in the public sector it was 4.2%.
The finance and business services sector saw the largest regular growth rate at 7.4%, followed by the construction sector at 6.1%.
Total pay including bonuses grew 5.9%, according to the ONS’s UK labour market figures in February 2023.
But in real terms, total and regular pay fell by 3.1% and 2.5% respectively, when compared with the same period a year earlier. The ONS said this decline was smaller than the record fall in real pay seen in February to April 2009 (4.5%), but was among the largest falls in growth since comparable records began in 2001.
The consumer prices index (CPI) rose by 10.5% in the 12 months to December 2022, down from 10.7% in November.
As economic uncertainty continued, the redundancy rate began to edge up. It reached 3.5 per 1,000 employees in October to December 2022, up by 0.8 on the quarter. This is still well below pre-pandemic rates, however.
Tim Gilbert, managing director for outplacement service Right Management, said this was not a cause for concern, but does suggest that some organisations have resumed a process of selective restructuring.
He said: “Sector-wise, we’re seeing increased levels of restructuring activity in manufacturing industries, where businesses are under pressure to address rising business costs.
“Team restructures in tech and finance, on the other hand, are capturing a lot of attention right now. This is due in part to the fact that many tech companies over-hired during the pandemic. But it only tells one side of the story. For all the tech firms that have announced they will be cutting staff, there are many others that have signalled strong hiring intentions for 2023.”
Candidate-to-vacancy ratio improves
The number of vacancies continued to fall, according to the February 2023 labour market figures, with 73,000 fewer job openings posted in November 2022 to January 2023 than in August to October 2022. This meant the number of unemployed people per vacancy increased to 1.1 in October to December, as the candidate-to-vacancy ratio improved.
Labour market
Employers still pushing up salaries in bid to attract staff
Ben Harrison, director of the Work Foundation at Lancaster University said: “Employers, workers and job seekers are feeling the squeeze. With the IMF singling the UK economy to be the only major economy to shrink in 2023, persistent worker shortages are likely to become a vital political topic in the months to come.
“The government has hinted it will double down on its approach of increasing welfare sanctions, notionally intended to get those out of work into any job and those in part-time work to up their hours. The reality is this will not help grow the UK economy nor support people into sustained employment. But it will acutely increase the stress and anxiety of low-income workers and their families.”
Kate Shoesmith, deputy chief executive of the Recruitment and Employment Confederation (REC), said the government should work with employers to draw more people from a range of backgrounds into employment.
“Recruiters and business groups still warn that labour shortages are holding back economic growth,” she said. “Next month’s spring Budget is the opportunity for government to provide further stability, clarity and much-needed support so that the economy can thrive despite the now stubborn labour shortages. Improving childcare support and provision to enable more parents to work and older workers such as grandparents to stay in work is vital, as is reinvigorating welfare to work schemes.”
Jonathan Boys, senior labour market economist for the CIPD, said: “When candidates are in short supply and even bumper pay rises can’t compete with inflation, employers need to consider the whole package they offer to staff.
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”With one in five people being economically inactive, employers need to think about these groups and design better-quality jobs. This includes flexibility in all its guises, not just home working. Flexibility is particularly valued by the over 50s, helping people get into and stay on at work.”
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