The latest data from XpertHR shows that the median basic pay award in the three months to the end of August 2022 was 4 percent.
This has now remained unchanged for the fifth consecutive rolling quarter.
Although RPI remained unchanged at 12.3 percent and the CPI fell marginally from 10.1 percent to 9.9 percent in August, this alone is not enough to close the gap between pay and inflation.
It is not the case that pay can’t closely follow higher rates of inflation. In August 1990, RPI stood at 10.6 percent but pay awards rose to 9.4 percent. 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.
What are organisations doing to help?
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 percent 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.
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 percent, up from 2.4 percent. 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 percent, up from 3.5 percent.
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 percent 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.”
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.
