Pay awards of 5% could become the norm for 2023 according to January’s analysis of pay settlements from XpertHR.
Its latest data shows median pay awards were worth 5% in the three months to the end of December 2022, which is equal to November’s figure, but more than double the median pay recorded for the same period in 2021 (2.3%).
The gap between pay settlements and inflation remains substantial and will likely continue to be so over the coming 12 months. The latest figure for the consumer prices index was 10.5% in December, down from 10.7% in November. The retail prices index, oft-cited by unions, was recorded by the Office for National Statistics (ONS) at 13.4% for December, down from the previous month’s 14%.
More than a quarter of all pay reviews take effect from January each year and while it is unlikely that pay will rise substantially in the coming months, the latest data shows that neither is there any sign of settlement levels dropping to where they were in the same period last year.
Based on the outcome of 36 pay awards taking effect between October and December, covering 64,945 employees, XpertHR found 4 percentage points covered the middle half of wage deals (7% upper quartile, 3% lower quartile), with the gap between top and bottom quartiles has widened to 5 percentage points (8% and 3% respectively)
Taking a matched sample approach, where the 2022 pay review is compared to 2021 for the same workers, 65.2% of pay awards are higher in the three months to 31 December 2022 than in the same period a year ago.
Pay awards January 2023
Sheila Attwood, XpertHR senior content manager for data and HR insights, said: “The cost-of-living crisis will continue to be front of mind for many pay setters as the turmoil of 2022 continues unabated into the new year.
“As the UK is faced with a period of recession, it is vital that employers seek to support their employees in the best way they possibly can, whilst doing their utmost to get the balance right between pay expectations and affordability.
“We have noted previously that several organisations have made off-cycle pay awards to help employees deal with the cost-of-living crisis. It will be interesting to see if this continues into 2023 or whether the forecasted fall in inflation from the middle of next year, together with the current 5% median pay award becoming the norm as we predict, will obviate the need for such measures.”
In the private sector, the value of the median base pay award over the year to the end of December 2022 was 4%, exactly double for the year before. Chemicals, retail and transport sectors saw a median basic pay award of 5% or more, the highest in the private sector.
While slightly lower, the public sector has seen more dramatic movement in the median basic pay over the past year, rising to 3.8% in December 2022 from just 1.4% in December 2021. However, this is likely due to many settlements being weighted in favour of employees at the bottom of pay structures, according to XpertHR.
Earlier this week the ONS said that real-terms pay growth fell by 2.6% in the period from September to November, making it among the largest falls in growth since comparable records began.