MNI INTERVIEW: UK Pay Awards Likely Peaked In Q1
UK pay awards remained at 32-year high in February, but there are signs of a slowdown ahead, according to XpertHR.
UK pay settlements rose at a 32-year record pace in the three months to February, but nominal wage growth likely peaked in the first quarter of 2023, the head of XpertHR's monthly survey told MNI.
XpertHR's latest forecast sees the median private-sector basic pay award in the 12 months to end-December 2023 at 5% -- with pay awards peaking at the current 6% in Q1 and then easing throughout the year.
"Our forecast indicates that pay awards may have reached their peak and will settle throughout the course of the year," XpertHR's Sheila Attwood said in an interview.
The Bank of England, which announces its policy decision on Thursday, is eyeing the labour market -- and particularly wages -- closely. Nominal wage gains continue to sit at the highest level in years, but, as inflation weighs, real wages are at multi-decade lows, the latest official data showed. (MNI POLICY: BOE On Course For Hold Unless Data Surprises)
The latest XpertHR survey, published on Wednesday sees the median pay award in the three months to end-February 2023 at 6%, matching the 32-year high seen in the previous rolling quarter.
PRESSURE OFF
Pay awards continue to lag inflation, Attwood said, meaning many workers are still having to contending with real pay cuts. Consumer prices rose 10.1% year-on-year in January, below the record 11.1% seen in October.
"However, economists see inflation easing back in coming months, reducing pressure on employers struggling to match price rises in their pay awards," she said.
XpertHR found that 90% of employees can expect a pay rise this year and for three in every five, the rise will be more than that 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.
As the cost of living rises, almost all employers cited upwards pressure on their salary budgets. Although inflation is the main driver of higher awards, industry competition and the ongoing skills shortage were also cited, Attwood said.
“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,” Attwood noted.