The latest data from XpertHR reveals that private-sector employers are predicting pay awards to rise to 2.5% in the 12 months to the end of August 2022, up from the 1.6% median award made in the previous year.
Following a tough start in the first quarter of 2021, where the median award sat at just 1.2%, pay awards jumped to 2% in the second quarter. This momentum is expected to carry on over the next 12 months as organisations continue to recover from the coronavirus outbreak. The majority (84.8%) expected to increase pay at their next annual review, with the remainder either unsure or expecting a pay freeze. In addition, more than half (50.4%) of employees are expected to receive a higher increase in pay than they did over the past year.
Should this forecast be realised, pay awards will return to the same level seen in the two years before the pandemic struck.
Key findings on pay forecasts for the year to 31 August 2022 include the following:
- Median returns to pre-pandemic levels. Employees in the private sector are predicted to receive a 2.5% pay increase over the coming year, up from the 1.6% recorded over the previous year.
- Deals closely bunched. The middle half of pay awards are expected to fall between 2% (the lower quartile) and 3% (the upper quartile), demonstrating a bunching of awards around the median.
- Wage standstills almost frozen out. Among those organisations that were able to provide a forecast of their next pay award, only 7.8% cited a pay freeze.
- 2% most common prediction. Almost a quarter (24.1%) of pay award forecasts for next year are at exactly 2%, followed by a 3% predicted increase (20.4%).
- Sectors in line. Employers in both manufacturing-and-production and private sector services are predicting a median 2.5% pay award. In both sectors the middle half of pay awards are expected to sit between 2% and 3%.
Pay award forecasts, 12 months to 31 August 2022
Latest pay awards findings
In the three months to the end of September 2021, XpertHR recorded a median basic pay award of 2% – a figure that has remained unchanged for six consecutive rolling quarters. Based on data of 84 pay settlements covering more than 1.2 million employees, XpertHR analysis also reveals:
- Pay freezes still a feature. In the current quarterly sample of pay awards, including basic salaries and performance-based payments, the proportion of pay freezes stands at just one in 12 (8.3%).
- Six in 10 pay awards higher. Among a matched sample of pay awards, six in 10 (60.9%) employee groups received a higher award than in the previous year. Fewer than a third (26.6%) received a lower award, and just one in eight (12.5%) received the same.
- Public-sector deals fall behind. In the year to the end of September 2021, pay awards in the public sector are worth 1.5% at the median, down half a percentage point on the previous rolling year, and down one percentage point from the 2.5% recorded a year ago. In the private sector, pay awards have edged up by 1.7% (from 1.6% in the year to the end of August 2021), putting them ahead of the public-sector.
Sheila Attwood, XpertHR pay and benefits editor, said:
“For much of the last year, organisations have continued to feel the impact of the coronavirus outbreak and pay awards have remained muted. However, many employers have reported that Covid-19 is likely to have less of an impact on their future pay plans, with pay awards predicted to increase to 2.5% by September 2022.
“Driving these increases will be a need to respond to the market, with recruitment and retention difficulties pushing wages higher. However, while many organisations also believe that some economic recovery will enable them to award higher increases at their annual pay review, others are still concerned about business volumes and are likely to remain cautious.”