Lower pay settlements are expected later in the year according to XpertHR, falling from the current 6% peak.
In the three months to the end of February the median pay settlement, based on the outcome of 198 basic pay awards, was 6% – remaining at a 32-year high. However, the median basic pay award in the 12 months to December 2023 is predicted to drop back to 5%, with inflationary pressures expected to ease later in the year.
The news comes as the Office for National Statistics published its latest inflation figures for February 2023, which showed the consumer prices index increasing to 10.4%, up from 10.1% in January.
XpertHR’s research finds that 90% of UK employees can expect a pay rise this year, and for 62% of this group this pay rise will be more than they received in 2022.
Just 3% of employees are likely to have their pay frozen in 2023. The outcome is still uncertain for 7%.
Pay settlements 2023
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Ninety-eight per cent of employers said they were experiencing upward pressure on their pay budgets, with 83% of whom stating this was drived by inflation and the cost-of-living crisis.
Three-quarters of organisations said their pay budgets were being stretched as they tried to keep pace with pay levels in their industry, while 67% cited the skills shortage as a factor increasing their salaries.
Sheila Attwood, XpertHR senior content manager, data and HR insights, said: “The past year has seen pay awards rise to record levels – a pattern that continued into the early months of 2023. However, our forecast indicates that pay awards may have reached their peak and will settle throughout the course of the year. The prevailing view among economic analysts is that inflation will ease back in the coming months, reducing the pressure on employers struggling to match price rises in their pay awards.
“Many organisations have struggled to meet employee expectations on pay over the past year. Ways to address this over the coming year include weighting pay awards to the lowest paid, providing an evidence base to decisions, looking beyond pay to enhance the benefits package and clearer and transparent communication with employees on their reward package.”
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Other findings from XpertHR’s analysis of pay settlements in the three months to the end of February 2023 included:
- 80% of pay deals were higher than the same group of employees received a year ago. Just 8% were lower and the remaining 12% were pitched at the same level
- Only 2% of pay settlements resulted in a pay freeze. This time two years ago, at the height of the Covid-19 pandemic, 35% of wage reviews resulted in a freeze.
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