Although pay awards remain at the highest recorded level since September 1992, they continue to trail rising inflation.
They lagged at 5.4 percent percentage points behind the latest Consumer Price Index (CPI), which now stands at 9.4 percent as of June 2022.
The latest data from XpertHR shows that the median basic pay award in the three months to the end of July 2022 was 4 percent, unchanged for the fourth consecutive rolling quarter.
Rising inflation
If inflation hits more than 13 percent in the fourth quarter this year, as predicted by the Bank of England, and pay awards continue to hold at 4 percent, pay will lag a sizable 9 percentage points behind inflation.
Even at lower inflationary estimates from the likes of NIESR (prediction for CPI to reach 11%), employees will be experiencing a considerable real terms pay cut.
The research also found that the interquartile range has narrowed. Fewer pay awards at the top of the range sees the upper quartile measure fall from 6 percent in the previous month to 5 percent in July. The lower quartile remains at 3 percent.
Also, the majority of pay awards are higher than the previous year. Employers continue to give higher pay awards than a year ago, with 85.1 percent of pay awards worth more than employees received in 2021.
In addition, the manufacturing industry has been found to fall behind the services sector. The median award in the manufacturing and production sector, recorded at 3.5 percent, has fallen behind the figure for the services sector at 4 percent, having surged ahead in the three months to the end of June 2022.
Public sector pay awards pick up
Large numbers of public sector workers who are covered by the public sector pay review bodies had their 2022/2023 pay awards announced at the end of last month.
With many covered by the “pay pause” the year before, the increases mark a considerable uplift for employees, particularly the lowest paid. However, the below-inflation increases could trigger strike action among public sector workers.
XpertHR recorded a median 2 percent increase in the public sector over the 12 months to the end of July 2022, up from 1.4 percent over 2021.
Sheila Attwood, XpertHR pay and benefits editor, said: “Pay awards continue to remain stagnant, unchanged from the previous three rolling quarters at 4 percent, in spite of soaring inflation. The latest rise in the Consumer Price Index, and predictions of an 11-13 percent rise by the end of the year, are both indicators that we are by no means near the end of this volatile period.”
“For many employees already struggling with the rising cost of living, the prospect of further inflation hikes, coupled with the energy price cap increasing from October, is likely to cause significant worry. While important, pay increases aren’t the only means through which employers can help employees through the worst of the cost of living crisis. For example, offering free financial planning advice or discount packages to employees can help staff manage finances more efficiently and cut the cost of essential products and services.”
Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.
