Not for use before: 00:01 Wednesday 29 September 2021
Higher inflation and labour shortages in key areas are having an impact on pay awards, with the median rising a little to 2.2% for the three months to October, and the average and upper quartile rising by much more, according to the latest monitoring figures from Incomes Data Research (IDR). An analysis of 41 new pay deals implemented between 1 August and 31 October 2021 reveals that around one in five reviews across the economy have given employees increases of more than 3%. This has led to the upper quartile of awards rising significantly from 2.8% in September to 3.5% in the current period.
The tighter labour market, and rising inflation, is clearly having an effect, though more in some areas than others and the average pay outcome across the economy has also risen and is now 3.0%, having been at 2.6% in September.
At the lower end of the distribution of pay awards, there has been a drop in the proportion of pay freezes, with the majority of these occurring in the public sector. As a result, the lower quartile has risen to 1.8%, up from 1.7% in the previous rolling three-month period.
The private sector median fell to just 1.7% in the three months to March 2021 and then rose steadily to 2.6% in October. The impact of recruitment and retention problems following the re-opening of the economy, and in the most recent period, the sharp rise in the cost of living, have contributed to the upward trend.
“Our regular monitoring of pay trends throughout 2021 showed a fairly stable median of 2.0% across the economy for most of the period. However, as we reach the end of the year and look back at our whole sample for 2021, the picture has altered, particularly in the private sector”, commented Zoe Woolacott from IDR.
Pay trends in the private sector reveal that there has been a steady rise in the median since May. In the most recent period for the three months to October, the median has risen from 2.1% to 2.6% following a surge in the number of higher-end awards worth 3% or more in private services, where the average is now 3.9%.
“Relatively high pay rises of 5% or more have been awarded in certain parts of the service sector, such as retail, road transport and hospitality, as employers try to address recruitment and retention issues alongside the added upward pressure of higher inflation”, added Woolacott.
Meanwhile in manufacturing, the median remains at 2.0% with three-quarters of awards worth between 2.0 and 2.99%. There are no high-end awards in our manufacturing sample, and this has resulted in a drop in the upper quartile from 2.5% in September to 2.1%. However, autumn is a relatively quiet period for awards in the sector, with the majority of awards effective in January and April. It will be interesting to see what winter pay decisions bring in this sector and beyond (see below).
Looking ahead to 2022
An initial look at already-decided outcomes for 2022 shows that the median pay award across the economy is likely to rise again – possibly up to 2.5% at least, based on 21 new year awards that we have monitored so far.
“The rising level of inflation is placing pressure on employers to award higher pay increases and this, coupled with the National Living Wage rising by 6.6% on 1 April 2022, means that we may see a considerably higher median by the spring”, commented Woolacott.
For any queries relating to this research please contact Zoe Woolacott on 01702 669549 or at firstname.lastname@example.org
Note for editors
Incomes Data Research monitor pay reviews across the economy throughout the year and publish findings in ‘Pay Climate’, our quarterly e-bulletin, with additional monthly updates on our website: https://www.incomesdataresearch.co.uk/