The majority (91 per cent) of employees will receive a pay rise next year as inflation and skills shortages continue to bite, a survey has found.
The poll, conducted by XpertHR, found that the median basic pay award in the 12 months to the end of August was set to rise by 5 per cent, with a projected 29 per cent of employers planning to award this.
The data from 323 private sector organisations revealed the vast majority (89 per cent) of businesses attributed their pay increases to the cost of living crisis, while just over three-quarters (78 per cent) said the intention could be attributed to skills shortages.
However, of those who mentioned that there could be negative factors of giving pay rises, a third (32 per cent) cited affordability as an issue.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said wage inflation was currently at 5.4 per cent, while inflation was at 10.1 per cent – and that businesses will be keen to control costs where possible. “Clearly this means an awful lot of employers aren’t offering an inflation-linked pay increase,” said Coles, adding that wages were only rising for in-demand roles in an effort to improve talent and retention. “Wage rises are far more lumpy in some instances.”
Meanwhile, Charles Cotton, senior reward adviser at the CIPD, said pay rises were important for employers to not only stay competitive, but also to ensure an acceptable living standard for their employees. “Employers need to know what pay increases other organisations in their industry and location are offering so that they stay competitive,” he said.
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Ian Moore, managing director at Lodge Court, welcomed the pay rises, particularly with many firms experiencing financial constraints, but warned against businesses making promises they could not keep. “With uncertainty surrounding future energy costs, and rents expected to rise, it may not be possible to fulfil all promises of salary increases,” said Moore. He added it was “vital that business leaders maintain clear communication with staff to manage expectations and seek alternative forms of reward if needed”.
The survey found that pay awards in the coming year were predicted to fall between 0 and 15 per cent. The middle half of deals were projected to be between the relatively wide range of 3.5 per cent and 6 per cent.
The most common pay increase, according to the analysis, was 5 per cent, with 17 per cent of the organisations surveyed having awarded this. The second most common was 4 per cent, with 14 per cent of businesses having awarded this.
Vickie Graham, business development director at the Chartered Institute of Payroll Professionals, said the figures were encouraging, and will have partly been down to the increase in the living wage to £10.90. However, businesses, especially SMEs in the public and third sector, will need to consider other ways to retain employees, she said.
“We are seeing payroll departments leading on initiatives such as increasing financial awareness and education, supporting employees through salary sacrifice or pay advances and loans, as well as offering savings through payroll to employees,” she explained.
But Jill Cotton, career trends expert at Glassdoor, said that while salary remained the top concern for applicants, many are increasingly interested in a company’s approach to EDI and culture and, once a person is in a role, salary tends to be the least important aspect of employee satisfaction. “Instead, it is alignment with company culture, access to learning and development, and strong senior leadership that keeps talent at a company,” she said.