The average pay settlement reached 6% in the three months to January 2023 – a 32-year high, according to XpertHR.
This was a one percentage point increase as the median seen in the previous rolling quarter, as well as the highest average award recorded by XpertHR since 1991.
The gap between pay deals and inflation narrowed slightly, but employees are still seeing a pay cut in real teams. Inflation at the consumer prices index (CPI) measure was 10.1% in the 12 months to January 2023.
However, XpertHR said inflation would start to fall and predicted that it would ease back to 4.3% in the fourth quarter of this year.
Its analysis of 110 basic pay awards effective between 1 November 2022 and 31 January 2023, covering more than 240,000 employees, showed that:
- Four-fifths (81.1%) of pay settlements were higher than what the same group of employees received a year earlier
- Pay settlements ranged between 2% and 10.9%
- No settlements resulted in a pay freeze
- The middle 50% of basic pay reviews ranged between 4.5% and 7%, compared with a 4.8 percentage point spread last month.
Sheila Attwood, XpertHR senior content manager, data and HR insights, said: “This latest dataset is significant because it includes the first wage reviews of the calendar year, giving those responsible for determining pay awards later in the current bargaining round – including April, the most important month in the annual settlement calendar – an indication of where deals are heading.
“For many employers the most important determinant of wage setting outcomes is simply their ability to pay. Of course, businesses will want to keep pace with inflation and give staff all the financial support they can, but a lot simply cannot afford an increase of that magnitude.
“There is no denying tensions between employers and their employees are high at the moment, with industrial action across various sectors dominating the headlines – and dispute over pay is a key factor. Where employers cannot afford higher salary increases, to support staff through the cost-of-living crisis they may consider other arrangements, for example a no-interest loan or a one-off lump-sum payment.”