Private sector workers are set to receive average pay rises of 2.4% in 2021, up from an average of 2.2% in 2020 according to salary forecast research.
The number of UK companies expecting to freeze pay in 2021 is expected to fall sharply, in a sign of cautious optimism for 2021. According to Willis Towers Watson’s Salary Budget Planning report, one third of private sector companies froze pay increases in 2020 as they curtailed costs amid the Covid-19 pandemic. But this is expected to fall to just 3% of companies in 2021.
Keith Coull, senior director at Willis Towers Watson Global Data Services, said: “After a difficult year for employers and employees – battling lockdowns, employee safety issues, working from home and declining revenues – many employers are finding ways to handle the crisis better, manage their businesses and help their employees with a more focused work and reward strategy.
“Many companies are looking ahead to 2021 with cautious optimism, which is reflected in slightly higher pay rise budgets than we saw this year.”
A similar picture is emerging across western Europe, most organisations in the major economies anticipating higher pay rises in 2021 than this year.
The least generous UK pay rises are leisure and hospitality, offering 1.4% average increases in 2021, construction, property and engineering (1.8%) and automotive (1.9%).
At the higher end, the insurance sector is offering 2.9% on average, fintech (2.8%) and business and technical consulting (2.8%).
Retail is also among the industries expecting the highest pay rises in 2021, at 2.9%, which may be a reflection on buoyant sales for some online retailers, and a reaction to the high number of pay freezes (48%) taking place this year at others.
“Not all industries have been impacted in the same way,” said Coull. “While many technology and banking firms have been successful due to their ability to aid digital acceleration and financial liquidity, companies in the hospitality, leisure and airline industries have suffered. The differences in how companies were impacted by the pandemic are likely to be heavily reflected in pay rise levels too.
“We are also expecting many companies to be differentiating their allocation of pay rises, so that they can provide meaningful salary increases to their best and most valuable talent and prioritise spending on jobs that are likely to contribute the most to success or survival next year.”