Pay: 2% is the ‘new normal’

Pay awards have stabilised for the first time in two years and 2% is the “new normal”, according to XpertHR.

The median basic pay award in the three months to the end of August 2021 was 2%, compared to nil just over a year ago when employers were grappling with the economic fallout from the pandemic.

In the 12 months to the end of August, pay settlements in the private sector were worth 1.6% on average – just a small increase on the 1.5% median recorded in the year ending July 2021, but 0.4 percentage points below the figure recorded for the year to the end of August 2020.

Pay awards in the public sector settled at 2% in the year ending August 2021, down from 2.5% the prior year.

XpertHR’s analysis is based on the details of 102 settlements covering more than 1.2 million employees.

“It’s been a turbulent time for pay setters, with last year employers postponing April 2020 pay reviews until later in the year – and in many cases then abandoning any increase altogether,” said XpertHR pay and benefits editor Sheila Attwood.

“Now, pay freezes are becoming much less common in the pay scene but are still evident, as shown in the data. Pay rises never fully recovered last year, but after a slow start at the beginning of this year, levels are now holding up.”

Some 6.9% of settlements effective in the three months to the end of August resulted in a pay freeze, close to the long-run average of around 5% of pay awards in any given year.

Nearly two-thirds (61.5%) of employees received a higher award than in 2020 while 15.4% were awarded the same increase. Almost a quarter (23.1%) saw a lower award than the last pay round.

The range of pay awards in the sample has also narrowed to just one percentage point, between 1.5% and 2.5%, compared with nil and 2.5% a year ago.

Reward, compensation and benefits opportunities

Browse all comp and benefits jobs