The latest data from XpertHR shows that the median basic pay award in the three months to the end of August 2022 was 4%, unchanged for the fifth consecutive rolling quarter.
Although RPI remained unchanged at 12.3% and the CPI fell marginally from 10.1% to 9.9% in August, this alone is not enough to close the gap between pay and inflation.
It’s not the case that pay can’t closely follow higher rates of inflation. In August 1990, RPI stood at 10.6% but pay awards rose to 9.4%. This indicates that although falling short, employers have in the past kept up with high inflation.
The inability for earnings to keep pace with inflation has created hardship for many employees, but there are a number of practices being adopted aimed at easing this. Although in their minority, organisations are helping in the following ways:
- Offering an additional pay increase mid-way through the year. A services company gave pay increases in both January and April “reflecting the volatile inflation situation”; while another followed its April pay increase with a further rise in August due to the cost-of-living crisis.
- Giving a non-consolidated payment to employees. A services organisation paid £1,000 to each employee as a cost-of-living payment; whilst another with an April 2022 review date said that it had made some one-off cost-of-living payments in July on top of its April increase.
- Consolidated payments. A manufacturer added an additional 2% to its merit budget for additional consolidated increases to reflect the current “extraordinary circumstances”.
- Bringing forward the annual pay review. A manufacturing company awarded pay increases three months ahead of the January 2022 review date; while another moved forward the increase due in July and paid it in May 2022.
Latest pay award findings:
Based on the outcome of 99 pay settlements with effective dates between 1 June 2022 and 31 August 2022, covering more than a million employees, XpertHR also finds:
- Lower quartile dips. The lower quartile of pay awards has dipped slightly, from 3% recorded in the previous five rolling quarters, to 2.9%. The upper quartile remains at 5%.
- Majority of pay awards are higher than the previous year. Employers continue to give higher pay awards than a year ago, with 84% of pay awards worth more than employees received in 2021.
- Services sector ahead of manufacturing. The median pay settlement in the services sector (which includes the public sector) is 4%, with the middle half of pay awards sitting between 3% and 5%. In the manufacturing-and-production sector, the median award over the same period is 3.5%. The interquartile range in manufacturing-and-production awards is between 2.5% and 5%.
Further uplift to public-sector pay awards
Public sector pay has seen a further increase, on top of that recorded last month. In the year to the end of August 2022, the median pay award in the public sector stands at 3%, up from 2.4%.
The median pay award in the private sector has also seen an increase in the year to the end of August 2022, to 3.7%, up from 3.5%.
These changes mean that the gap between the median pay awards in the private sector and the public sector over this period has closed to 0.7 percentage points, the narrowest it has been since the year to the end of December 2021.
Sheila Attwood, XpertHR pay and benefits editor, said, “While inflation dipped very slightly this month, the consensus remains that we’re by no means out of the woods and employees will continue to see a real terms pay cut. To bridge the widening gulf between pay and inflation, pay awards will need to rise significantly beyond the current 4% figure.
“For many businesses an additional across-the-board pay rise is not feasible, but we are seeing one-off payments and other financial assistance from employers to help ease the cost-of-living crisis.”