Home Business News Wages set to rise as-cost-of living crisis looms

Wages set to rise as-cost-of living crisis looms

by LLB Finance Reporter
19th Jan 22 9:36 am

The latest data from XpertHR shows that the median basic pay increase is predicted to rise to 2.5% in January 2022, a sharp increase against the 2021 quarter four figure of 2%.

2021 in summary

Across the whole economy, the median basic pay award in 2021 stood at 1.8% – just below the 2% recorded for 2020. However, some differences are noted by broad sector:

Analysis of 130 basic pay awards in the public sector in 2021 found a median 1.4% increase was made across the year, with the middle half of settlements sitting between 1% and 2.2%. These figures are significantly lower than those recorded for 2020, when the median pay deal was worth 2.5% and the interquartile range was 2% to 3%.

Analysis of 829 basic pay awards in the private sector in 2021 found a median 1.8% award, with the same interquartile range as the public sector – 1% to 2.2%. By comparison, in 2020 in the private sector the middle half of basic pay awards fell between nil and 2.7%, with the median award at 2%.

Latest pay award findings

The end of the year is the quietest time of the year for pay bargaining, with less than 5% of pay awards effective in the final three months. Based on the outcome of 28 pay settlements with effective dates between 1 October 2021 and 31 December 2021, covering more than 38,000 employees, XpertHR finds the following:

  • Headline pay award worth 2%. The median basic pay award in the three months to the end of December 2021 is worth 2%, down from 2.4% (revised) figure recorded in the previous rolling quarter.
  • Interquartile range remains wide. The lower quartile is at 1.5% and the upper quartile is at 3%. The upper quartile has now been at 3% or more for three consecutive rolling quarters, suggesting that we are starting to see more pay awards at the higher end of the range.
  • Higher pay awards dominate sample. In a matched sample analysis, exactly half (50%) of the latest pay deals are worth more than the same group of employees received in 2020. One-third (33.3%) of settlements were made at the same level as the previous year, with the remainder (16.7%) lower than a year earlier.
  • Few pay freezes. Just three pay deals (10.7%) resulted in a nil increase for employees, compared with 35.3% a year ago.

2022 Outlook

All eyes are now on January 2022, when around a quarter (25.4%) of deals are settled (making it the second busiest month of the year, after April). XpertHR research from 2021 found that private-sector employers are forecasting a median basic pay rise of 2.5% during 2022, up from the 1.8% median award made in the sector over the past 12 months. If borne out, this will bring pay awards back to the level last seen in November 2019.

Preliminary analysis of a limited sample of January 2022 pay awards available to XpertHR at this time shows that the median pay award has jumped to 3%. The lower quartile among this group stands at 2.5% and the upper quartile at 4%. The most common deal is also worth 3%, but overall, the range of pay awards spans from nil to 7.1%.  A matched sample analysis shows that 80.6% of awards are higher than those received by the same employee group in the previous year, while 13.8% are at the same level and just 5.6% are lower.

Sheila Attwood, XpertHR pay and benefits editor, said, “A predicted increase in the median basic pay award against the backdrop of rising retail and consumer price indices offers a glimmer of hope amidst growing concerns about the widening gulf between take home pay and the cost of living.

“The BOE’s decision to raise the interest rate by 0.15% in December, to 0.25%, highlights growing fears for consumers struggling financially amidst rocketing energy prices and the prospect of a costly hike in national insurance contributions. Given that overall pay rises in 2021 were worth just 1.8%, it’s encouraging to see signs of growth for January.”

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