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Latest NewsPublic sectorInflationPay & benefitsPay settlements

Gap between pay and inflation largest since 1984

by Ashleigh Webber 27 Apr 2022
by Ashleigh Webber 27 Apr 2022 Shutterstock
Shutterstock

The average pay award now lags six percentage points behind inflation, the largest gap in almost 40 years.

Analysis of pay settlements effective between 1 January and 31 March 2022 found the median basic pay increase was 3%, whereas the retail prices index (RPI) measure of inflation was 9% in March 2022.

RPI is no longer used as an official statistic, but is still used by many trade unions in pay negotiations. XpertHR said this was the largest gap between RPI and the average pay award since its records began in 1984.

However, its analysis of 263 pay settlements in Q1 2022 covering more than 460,000 employees found that 84.5% of employees recieved a higher pay award than at their previous review. Only 3.6% saw a lower increase in their pay and 11.9% received the same award for the second year in a row.

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Some 22.9% of basic pay settlements analysed were recorded at 3%, which was the most common award.

Sheila Attwood, XpertHR pay and benefits editor, said: “Two successive months of stagnant pay settlements set against ever-increasing inflation will give cause to concern for those struggling to contend with the worsening cost of living crisis.

“While the current 3% median pay award is notably higher than the 1.2% recorded by XpertHR a year ago, the inflation rate was dramatically less than where it stands today. As a result, a deepening gulf between pay and inflation continues to develop, to the detriment of workers’ finances.”

Provisional analysis of settlements in April, the month in which 45.7% settlements take effect, showed that the median increased to 4%, with few pay freezes being implemented.

“As pay awards edge closer to the figures not seen since 2008, it speaks volumes of the position that both employers and employees find themselves in and should hopefully bring some comfort for the future,” said Attwood.

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The value of pay awards in the private sector have grown compared with a year ago, while those in the public sector have fallen. The median increase in the private sector is 2.2%, up from 1.6% in the 12 months to the end of March 2021. Those in the public sector fell from 2.5% in the year to the end of March 2021 to 1.4% in March 2022.

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Ashleigh Webber

Ashleigh is a former editor of OHW+ and former HR and wellbeing editor at Personnel Today. Ashleigh's areas of interest include employee health and wellbeing, equality and inclusion and skills development. She has hosted many webinars for Personnel Today, on topics including employee retention, financial wellbeing and menopause support.

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