Employees are typically receiving pay rises worth 3.0% in 2022, up from a median pay award across the whole economy of 2.0% overall for 2021, according to the latest monitoring figures from Incomes Data Research (IDR).
An analysis of 57 new pay deals already agreed for 2022 shows that over half of reviews across the economy have given or are set to give employees increases of 3% or more. This is far more than last year, when around a fifth of pay increases were at this level. Meanwhile at the lower end of the distribution, our monitoring has found that fewer employers are implementing a pay freeze for workers this year.
Pay freezes account for just 4% of outcomes in 2022 so far – down from 17% for 2021 – and this marks a return to pre-pandemic levels when freezes represented less than 5% of all outcomes. The proportion of lower-level pay awards (those worth between 0.01% and 1.99%) has also fallen significantly from around one-in-five, or 21%, in 2021 to just 2% of all outcomes for the current year.
Pay rises higher in private services than in rest of private sector
Firms in private services are making some of the highest awards across the economy, particularly those in retail and road transport. More than a fifth of awards in these sectors are worth 4% or more this year and such comparatively high increases are likely to continue as employers respond to the National Living Wage rising by 6.6% to £9.50 on 1 April 2022.
“We have observed large uplifts to basic pay due this year, with many employers responding to recruitment and retention issues by ensuring their pay remains competitive. The current high level of inflation is also an upward pressure that is forecast to continue” commented Zoe Woolacott from IDR.
Manufacturing firms dominate the majority of pay reviews at the start of the year – they account for just over half of reviews in this sample – and around a fifth of awards in this area are worth 4% or more. However, the largest cluster of awards in the sector (52%) occur in the 2.0% to 2.99% bracket. Awards at this level are common in the construction, engineering and food, drink and tobacco sub-sectors. Supply chain issues are one reason why the economy is running at different speeds in different areas.
Anticipating public sector pay awards
The public sector accounted for a significant proportion of pay freezes in 2021 as a consequence of Government policy. Some higher-level pay rises have already emerged, such as the 5% average increase to be awarded to thousands of HMRC staff in June and the lifting of pay restraint will no doubt also affect the pay scene across the sector this year.
The latest pay settlement figures are based on a sample of 57 awards effective between 1 January and 31 October 2022, mostly at large organisations and together covering over half a million employees. Very few awards in the sample are from the public sector and therefore the results predominantly reflect the picture in the private sector.