More than four in 10 professional services organisations expect to increase salaries for existing staff this year, following a year of bumper pay awards for new starters.
Professional services firms expect to see their payroll budgets increase by 10-15% in 2022, according to recruitment firm Robert Walters, with many planning to increase pay to retain existing staff and keep their pay in line with the higher salaries that have been awarded to new starters.
New starters’ salaries in professional services increased by 6-8% in 2021, research for Robert Walters 2022 UK Salary Guide found, while pay for existing employees remained flat.
However, organisations expected to make up for a year of wage stagnation, with pay for white collar workers estimated to increase by as much as 25% in the first quarter of 2022.
“Wage increases above market value for in-demand hires was a recurring theme of the past year. As a result, we saw new starter salaries outstrip those of existing employees,” said Chris Poole, managing director at Robert Walters UK.
“The consequences of this will result in ‘wage compression’ – where existing employees feel their additional experience at the company (over new starters) is no longer valued or has not grown in value over the past two years.”
Forty-three per cent of companies said they were planning to increase salaries for current employees this year.
Keeping pace with inflation had prompted 39% to consider awarding a pay rise, which Robert Walters warned could fuel a “wage-price spiral”– whereby higher prices and rising pay feed into each other and accelerate even more.
Over half (54%) of workers expected a pay rise this year following a two-year salary freeze.
Poole said: “There is little point in companies offering a pay rise as a morale booster if the impact of that increase isn’t really felt in the real world – and so we are increasingly seeing more companies consider the cost-of-living when determining the average pay rise an individual gets.
“Businesses will have to decide how much to raise their salaries to keep their employees, whilst also deciding how much to pass on those costs to their clients and consumers.”