Recent data reveals that the median basic pay award remained stagnant at 6 percent, remaining unchanged for the fifth consecutive rolling quarter.
This level of pay settlement has not been observed since 1991, indicating a trend in the current compensation landscape.
This comes from a report by XpertHR, a leading HR data and analytics company, who has released its latest findings on pay awards in the three months leading up to May 2023.
Inflation takes a toll on employees’ real-terms pay
Despite the consistent 6 percent pay awards, employees are facing a decline in real-terms pay due to high rates of inflation. The report highlights that the current inflationary pressures are eroding the purchasing power of employees, leading to an overall decrease in their actual earnings when accounting for rising prices.
The key findings of the latest rolling quarter:
XpertHR analysed data from 228 pay awards, covering nearly 400,000 employees, with effective dates ranging from March 1 to May 31, 2023. The study yielded several significant findings:
- 5 percent remains the most common pay award: Approximately 24.5 percent of the awards observed during the three-month period were at the 5 percent mark. This value continues to dominate as the highest proportion of pay awards.
- Minimal pay freezes reported: Only seven settlements, accounting for a mere 3.1 percent of all deals collected between March and May, were reported as pay freezes. The majority of employers opted to provide pay increases rather than implement freezes.
- Minority of deals meeting living wage standards: Roughly 7 percent of the reported pay settlements aligned with the living wage rate, either at the national or real living wage level. This indicates that a significant portion of pay awards fell below the living wage threshold.
- Increased proportion of higher pay awards: Comparing a matched sample of pay awards from the current year with awards for the same employee group from the previous year, XpertHR found a rise in the proportion of deals that offered higher pay than the previous year. In the three months leading up to May 2023, 77.2 percent of pay awards were higher than the awards given in the corresponding period of the previous year.
The latest findings from XpertHR shed light on the compensation trends in the current economic climate. Despite the steady 6 percent pay awards, employees face a real-terms pay cut due to the impact of inflation.
The study also underscores the varying levels of pay increases across different sectors, with some organisations struggling to meet the living wage standards.
Sheila Attwood, XpertHR senior content manager, data and HR insights, said:
“This month’s data includes pay awards from April, the busiest month of the year for pay reviews however awards remain the same, holding at 6 percent. Although inflation is beginning to fall as we enter the second half of this year, it still lies far ahead of pay rises, meaning employees will remain grappling with the effects of a real-terms pay cut.
“Despite some signs of the labour market easing, employers continue to report skills shortages and retention challenges. Pay and benefits are often used to help ease the pressures, and this is likely to be behind some of the increases we are seeing. We don’t expect to see any further upward movement in pay awards, although the slower rate of decline in inflation that is playing out may well leave pay awards higher than organisations had originally anticipated at this point in the year.”
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.
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