Almost half of businesses are not offering, or planning to offer, pay rises, research from the Chartered Management Institute (CMI) has shown.
The poll of more than 1,000 UK-based managers found that one in three were concerned about the financial performance of their organisations and, as a result, 48 per cent were not planning to give pay rises this year.
Among the organisations that were increasing pay, the average pay award was just 2.8 per cent, lagging far behind inflation.
Economists expect the consumer prices index, the government’s preferred measurement for annual living cost increases, to hit 9 per cent this month – and many employees are already struggling with rising energy, food and travel prices.
The lack of widespread pay rise action isn’t the result of employees not asking; the CMI research showed that a third of managers have seen an increase in requests from their direct reports for pay rises above basic awards. Similarly, a third of managers said they themselves were thinking of asking for a pay increase to meet the rising cost of living.
However, Anthony Painter, director of policy at the CMI, said employers alone were not able to tackle the financial pressures faced by employees. “Cost pressures are hitting employers and employees alike, and something in the system will have to give,” he said.
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“Businesses also face the squeeze as they face a potential downtick in wider consumer confidence, and higher prices for materials, supply chain issues and higher production costs.”
Almost three in five (57 per cent) managers surveyed by the CMI said their organisation had not taken or had no plans to take any action on rising business costs, and Painter warned that businesses could expect to see this pressure increase from both their employees and their supply chains in the coming months.
“Employers will need to think very carefully about providing additional compensation – caught between business costs on one hand but pressures on employee wellbeing on the other with potential knock on impacts on organisational performance,” he said.
The CMI’s data on the absence of pay rises appears to run against figures from the Office for National Statistics, which found that nominal pay grew 4.1 per cent in the year to January 2022, compared to an average of just 2 per cent in the decade before the pandemic.
However, the CMI’s latest findings align with research from the think tank Resolution Foundation which concluded that reports on wage inflation have been “overdone”.
The think tank said underlying wage growth, which controlled for the impact of furlough and other workforce changes, averaged just 2.7 per cent in 2021, the same as in 2019, before the pandemic.