Yahoo Finance UK pay lags inflation with record gap
UK pay awards remained flat in the first quarter of 2022 while inflation continues to rise and Brits face a growing cost of living crisis, according to new data from XpertHR.
The median basic pay increase in the three months to the end of March 2022 was worth 3%, unchanged from the previous two rolling quarters.
Although pay rises stand at the highest level since December 2008 – when the headline award was at 3.6% – they now lag six percentage points behind retail price index (RPI) which is at 9%.
The gap between inflation, as expressed by the RPI, and pay awards is at a record high with the biggest gap seen since XpertHR’s records began in April 1984.
“Two successive months of stagnant pay settlements set against ever-increasing inflation will give cause to concern for those struggling to contend with the worsening cost of living crisis," said Sheila Attwood, XpertHR pay and benefits editor.
The majority (84.5%) of firms awarding pay rises handed employees a higher increase than they received at their previous review. Just 3.6% saw a lower increase, while the remaining 11.9% received the same award for the second year in a row.
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The median pay increase among private sector employers was 3% in the first quarter of the year, up from 1.2% a year ago. But many employers went beyond this, with the top quarter of deals worth 4.8% or more.
"While the current 3% median pay award is notably higher than the 1.2% recorded by XpertHR a year ago, the inflation rate was dramatically less than where it stands today. As a result, a deepening gulf between pay and inflation continues to develop, to the detriment of workers’ finances," said Attwood.
Over the past 12 months, the median increase in the private sector was 2.2%, up from 1.6% in the same period a year before. However, pay in the public sector has moved in the opposite direction, falling from 2.5% in the year to the end of March 2021 to 1.4% in March 2022.
When looking at provisional analysis of April pay awards, the month in which 45.7% of settlements take effect, there was a notable upturn in pay settlements with the median pay award set to rise to 4%. The majority of deals were higher than a year ago and few employees saw pay freezes.
The median basic pay increase was worth 3% and the middle half in the spread of pay awards showed a bunching of deals around the median. The middle half of pay awards came in between a wide range of 2.5% to 4.8%, according to the analysis.
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Almost a quarter (22.9%) of employers settled at 3%, the survey found – the most common across the sample of 263 pay settlements in the first quarter, covering more than 460,000 employees.
The Bank of England (BoE) came under fire in February after governor Andrew Bailey urged Brits to limit their pay bargaining to prevent the country sliding into a wage-price spiral, with annual inflation already running at a 30-year high of 7%. This is more than triple the BoE target of 2%.
