Zoe Woolacott | 16 Mar 2021

How have pay rises responded to the pandemic?

The pandemic is having a noticeable effect on both the level and timing of pay rises, according to the latest analysis from IDR. Our 2020 monitoring showed a notable increase in the number of pay freezes but firms that continued to pay rises did so at similar levels to previously – at around 2%-2.5%. However, we also saw an increase in employers deferring decisions and some altering the effective date of pay rises to take effect later in the year and cover a shorter period. Early indications for 2021 suggest we will continue to see pay freezes and where paid, lower pay rises.

Pay freezes and pay rises

In 2020 16% of all pay reviews monitored by IDR resulted in a pay freeze. This is up from 3% in 2019. So far are in 2021 a fifth of pay review outcomes are freezes.

As the chart shows, half of all awards in 2020 were worth between 2% and 2.99% and there was an even balance of pay freezes and higher-end awards worth between 3% and 3.99%. However, an early look at the distribution of awards so far for 2021 differs somewhat, with nearly half of awards worth less than 2%. 

Deferrals

Given the uncertainty around the path of the pandemic and the economy’s likely recovery, it is perhaps not surprising that we witnessed an increase in the number of employers deferring their decision on the pay review for 2020.

We monitored the conclusion of pay award decisions that were deferred in 2020. Our sample contains outcomes from across the economy and consequently, the results are varied. Nearly four-fifths of employers who delayed their pay review decisions were able to implement a pay rise later in the year, with many backdating the increase to the usual anniversary date. While other employers have officially announced the freezing of pay, a small proportion continue to pause the 2020 pay review and have either delayed the implementation of an agreed rise or postponed their discussions into 2021. After a while such pauses effectively become a pay freeze as basic pay has not increased.

Elsewhere, there have been instances of changes being made to previously agreed long-term pay deals with agreed pay rises being cancelled or delayed.

Support this research

We will continue to monitor pay outcomes to capture the up-to-date picture. If you would like to help with this important research, and receive a copy of our next full analysis article, please take part in one of our online surveys to tell us of the pay award or pay deferral at your organisation: