Pay award trends – Private sector

Pay Award Trends – Private Sector

Generous statutory increases featured in our previous newsletters, with increases topping almost 10% across all groups of pay for those on national minimum wage. 

Within the private sector, XpertHR has analysed data across 198 companies, gathering data on awards paid out to 450,000 employees between December 2022 and February 2023. Analysis shows that average pay awards have been less generous than those awarded to employees on minimum wage. Whilst the analysis shows that a pay-setting pace quickened as we entered the new year, with the moving median rate increasing from an average of 5% in the three months to December 2022 up to 6% in the three months leading to January 2023. 

This has now settled and has remained stable at 6% in the three months leading to February 2023.  

Real wages are still on the decline

This means that basic pay awards continue to lag behind inflation, with our workers still struggling with the cost of living crisis resulting from a cut in real wages.

CPI (consumer price index) data shows that inflation is still increasing, with the yearly inflation to the end of February 2023 hitting 10.4%, which showed a small increase from the January 2023 rate of 10.1%.

CPI inflation is expected to fall sharply by the end of the year from a year-on-end average high of 10% in Q1, falling to 7.6% in Q2, thereafter declining further to 6.1% in Q3 and 4.1% in Q4.

In 2024, RPI (retail price index) inflation is ‘projected’ at an average of 4.5% in Q1 and 3.2% in Q2. The corresponding figures for CPI inflation are 3.5% and 2.4%, respectively.

Pay awards by sector 2023

Table 1 (below) supplied by XpertHR breaks down the pay awards by sector - most of this data derived from January 2021 pay award survey submissions. Manufacturing and production awards varied considerably, with construction awarding the lowest increases at 2.5%, with fellow manufacturers in engineering, metals, and general manufacturing awarding their employees a more generous median basic award of 6%.  

The highest awards within the service industry were set by transport and storage at 8% at their medium basic rate, with professional business services industries lagging at just 5%. The full details across the private sectors at lower, median, and upper quartile increases can be seen in the table below.  

Where are things heading?

Employers themselves are predicting a 5% basic wage rise in 2023, which is one percentage point below the current median. Eighty-two per cent of respondents say inflation will have the biggest impact on pay in the next few months. 

The latest research from XpertHR survey shows that respondents predict pay levels will continue to increase in 2023, with 72.7% of respondents not predicting a drop from the current upward trend. According to the survey, 66.9% of respondents attributed the upward pressure they are experiencing with pay due to skill shortages. Among respondents, downward pressures on pay have less influence, with 29.4% citing a decrease in overall business performance as the most influential downward factor.

Overall, companies will continue to be under pressure to remain competitive in terms of pay to avoid the hefty expense associated with replacing leavers. This is estimated to be between six and nine months' pay for salaried employees, depending on seniority.