Pay awards to peak at 6% in 2023

The latest forecast from XpertHR shows that the median basic pay award in the 12 months to the end of December 2023 is predicted to stand at 5% – with pay awards peaking at 6% in the first quarter and easing throughout the year.
March 24, 2023
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The latest forecast from XpertHR shows that the median basic pay award in the 12 months to the end of December 2023 is predicted to stand at 5% – with pay awards peaking at 6% in the first quarter and easing throughout the year.

XpertHR’s research finds that 90% of UK employees can expect a pay rise this year and for three in every five (62%), this pay rise will be more than they received in 2022. Just 3% of employees are likely to have their pay frozen in 2023 while the outcome for the remaining 7% is still uncertain.

With prices continuing to rise, almost all employers (98%) have cited upwards pressure on their pay awards budgets. The most common reasons for this are inflation and the cost of living (83%), as well as pay levels in the same industry (73%) and the ongoing skills shortage (67%).

XpertHR’s data also shows that the rising national living wage, which will increase by 9.7% in April this year, is another factor putting pressure on their pay awards budget.

The latest data from XpertHR shows that the median basic pay award in the three months to the end of February 2023 was 6%, matching the level recorded in the previous rolling quarter and remaining at a 32-year high. However, pay awards continue to lag behind inflation, which hit 10.1% in January, meaning many workers are still having to contend with a real terms pay cut.

XpertHR’s data is based on the outcome of 198 basic pay awards with effective dates between 1 December 2022 and 28 February 2023, and covers more than 450,000 employees. XpertHR also found that:

  • Most pay deals are now higher. A review of a matched sample of basic wage awards finds that just over 80% of deals are higher than 12 months ago. Fewer than one in 10 (8%) were lower and the remaining 12% were pitched at exactly the same level in both years.
  • Fewer pay freezes are expected. This time two years ago more than one-third (35%) of all pay reviews resulted in a wage standing still for at least 12 months. A year ago, this figure had fallen to just 3.5%. In the latest rolling quarter, barely 2% of all the settlements resulted in a pay freeze.
  • Interquartile range slightly higher than previous rolling quarter. The middle 50% of pay reviews, known as the interquartile range, is covered by 2.7 percentage points, compared to 2.5 percentage points last month. The upper quartile stands at 7.5% and the lower quartile at 4.8%.

Sheila Attwood, XpertHR senior content manager, data and HR insights, said, “The past year has seen pay awards rise to record levels – a pattern that continued into the early months of 2023. However, our forecast indicates that pay awards may have reached their peak and will settle throughout the course of the year. The prevailing view among economic analysts is that inflation will ease back in the coming months,  reducing the pressure on employers struggling to match price rises in their pay awards.

“Many organisations have struggled to meet employee expectations on pay over the past year. Ways to address this over the coming year include weighting pay awards to the lowest paid, providing an evidence base to decisions, looking beyond pay to enhance the benefits package and clearer and transparent communication with employees on their reward package.”

Original Article: London Loves Business

Looking beyond pay to enhance benefits, contact our recruitment specialist Gareth Allison or give us a call on 02920 620702 for assistance.

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