Pay awards have seen their biggest increase in more than a decade, according to the latest analysis by XpertHR.
It found that the median pay award for the three months to the end of January 2022 was 3%, up a whole percentage point from 2% in Q4 2021. The last time pay awards were this high was December 2008, when the headline award was 3.6%.
Eight in 10 of the groups XpertHR analysed received a higher award in this quarter than in their previous pay round, despite calls from the governor of the Bank of England to reign in pay rises to stem inflation.
Despite a buoyant quarter for pay awards, they still lag behind both consumer prices index and retail prices index measures of inflation, said Sheila Attwood, XpertHR pay and benefits editor.
She explained: “The Bank of England now expects CPI inflation to peak at 7.25% in April 2022.
“This is higher than predicted in its November 2021 report, which means further increases in pay awards are almost a certainty. It is hoped that any pay increases will help ease the burden of the cost-of-living crisis which is expected to worsen as the year progresses.”
Based on analysis of 101 pay settlements between 1 November 2021 and 31 January 2022, XpertHR found that the range between the lower and upper quartile of pay awards had also increased, to 2.5%.
The upper quartile (at or above which the top quarter of deals lies) rose to 4.1% from the 3% level seen in the previous rolling quarter. Around one in eight awards remained the same, and just 4% were lower.
Only 6.9% of employees experienced a pay freeze – a dramatic change from the same period a year ago, when pay freezes accounted for a third of awards.
Attwood added: “The dramatic rise in the median basic pay award is direct evidence of the inflationary pressures on both employers and their employees.
“Against the advice of Andrew Bailey, the governor of the Bank of England, employers have sought to protect employees from bearing the brunt of a cost living crisis that is expected to last until 2023.
“In doing so, our measure of pay awards is at its highest level since December 2008, but still lags behind retail prices index inflation by 1.8 percentage points, as it has done in each rolling quarter since December 2020.”