Zoe Woolacott | 10 Mar 2022

High-end pay awards worth 3% or more set to dominate in 2022

Over three-quarters of employers anticipate awarding a pay rise worth 3% or more in 2022, according to IDR’s latest poll of 66 mostly medium and large-sized private sector employers. The results of our poll provide insights on pay awards for 2022 and highlight a brighter outlook from employees’ point of view when compared to 2021 with nearly a quarter (23%) of participants predicting that their main pay rise will be worth at least 5.0%. 

By sector, employers in private services are the most likely to award an increase worth 5% or more with around a fifth of participants in the sector anticipating that the pay increase for their main group of staff will be between 5% and 5.99% and nearly one in ten likely to implement an award worth 6% or more. These predicted outcomes are most common in retail and financial services.

More than four-fifths (83%) of respondents reported that the level of pay rise will be higher this year when compared to 2021. Of the remaining participants, 14% said that the level of pay rise in 2022 is likely to be the same as the level of increase awarded in 2021 and just 4% of employers in the sample expect that the pay award will be lower in 2022 when compared to last year’s outcome.

Analysis of responses by sector show that 86% of manufacturing employers in our sample expect to award a higher increase in 2022 when compared to last year. This proportion is higher than in private services, where 77% of participants in the sector anticipate this outcome. All employers in the not-for-profit sample anticipate awarding a higher pay increase this year, when compared to 2021. Pay freezes and low-level increases below 2% dominated this sector last year and fewer than one in ten awards were worth 3% or more.

Factors influencing pay decisions in 2022

Participants were asked to indicate the main influences on their organisations’ pay decisions for 2022. Higher inflation and increased labour market pressures proved to be the top two factors with 83% and 82% of respondents citing these as one of the main influences. The third most influential factor (55%) in pay decisions this year is employee motivation and morale, which is an unusually high proportion and is likely to reflect the post-pandemic conditions that have presented employers with wholly new challenges in respect of engaging their workforces.

The next most influential factor was the National Living Wage (as cited by 41% of employers in the sample). Other factors specified by employers include affordability and employee performance. Profitability came lower down than all of these, and while we offered the option of ‘reduced labour market pressures’ to those who might have been experiencing this, none took it up, indicating that tighter labour markets are universal.

Pay trends in 2022

The results from the poll echo the current findings from IDR’s monitoring of pay trends. Our latest analysis of agreed pay outcomes for 2022 reveals a median of 3.0% across the whole economy. Higher-end awards worth 3.0% or more represent over half (55%) of deals effective in 2022 so far – up from around a fifth of awards in 2021 when the overall median was 2.0%.

About the research

The poll was conducted in February 2022. It gained 66 responses from mostly larger firms employing over 700,000 workers in total. 

If your organisation has agreed a pay award for 2022, let us know via the link below to receive a free copy of our next analysis of current trends.