Employers set to award record pay rises in 2022

Employers have reported that the median basic pay increase in their organisation (excluding bonuses) in the 12 months to December 2022 will be 3%, the highest figure recorded in the last 10 years of the Chartered Institute of Personnel and Development’s (CIPD) reporting. The CIPD’s latest quarterly Labour Market Outlook, which highlights the scale of the increasing challenge facing organisations in finding and keeping staff, suggests this quarter’s pay award figure is the “highest” since the survey was conducted using its current methods in the winter 2012/13 report. It revealed, over two-thirds (70%) of employers said that they plan to recruit in the next three months to March 2022 and just one in 10 (11%) plan to make redundancies. Redundancy intentions were “significantly” higher before the pandemic, at 16% in winter 2019/20. However, while the institute said recruitment intentions remain strong, almost half (46%) of UK employers report having vacancies that are “hard-to-fill”. Two thirds of employers (64%) anticipate problems filling vacancies in the next six months, with a third (33%) expecting these problems to be ‘significant’. In response to recruitment challenges, in the past six months almost half (48%) of employers with hard-to-fill vacancies have increased wages to “attract new hires” and 46% of employers have advertised more jobs as flexible. Furthermore, CIPD also said there is a “clear focus” on workforce retention. Two-fifths of employers (41%) reported increased employee turnover or difficulty with retaining people over the last six months. To address this, almost half (46%) of employers with retention difficulties have raised the pay of the incumbent workforce in the last six months and 40% plan to raise pay in the future. Jonathan Boys, labour market economist for the CIPD, the professional body for HR and people development, said: “Even though businesses anticipate making record pay awards to their employees this year, most people are set to see their real wages fall against the backdrop of high inflation. “What is encouraging is that more employers are looking beyond pay increases to help attract and retain staff by providing more flexible working opportunities and investing in more training and development, as well as taking steps to support employee health and wellbeing.” He added: “However, the UK Government must also address skills policy failings to support greater employer investment in workforce training. In particular, there is a growing need to reform the Apprenticeship Levy into a more flexible training levy to help reverse the falling number of apprenticeships going to young people and enable employers to use the levy for other forms of more flexible and cost-effective training for existing employees.”