Connect with us

News

Pay awards fall below 6% for the first time in 2023

Published

on

The latest data from XpertHR shows that for the first time this year, the median basic pay award has fallen below 6%, standing at 5.7% in the three months to the end of July 2023. 

Official measures indicate that inflation continues on a downward trajectory – welcome news for employees who have been experiencing a real-terms pay cut for an extended period of time. The latest Office for National Statistics (ONS) data shows the consumer prices index (CPI) currently stands at 6.8% in July 2023, down from 7.9% in June, and the retail prices index (RPI) at 9%, down from 10.7%. Despite these drops, pay rises will continue to lag behind inflation in the short term. 

The outlook for employees is improving, though. Inflation forecasts compiled by XpertHR estimate RPI to stand at 6.2% for Q4 2023, and with pay settlements awarded in April typically set to last for a period of 12 months, employees can expect the gap between pay growth and inflation to narrow throughout the remainder of the year. 

Latest rolling quarter findings: 

Based on the outcome of 54 pay awards with effective dates between 1 May and 31 July 2023, covering over 500,000 employees, XpertHR also found that: 

  • 5% remains the most common deal. Around one in six (15.8%) pay settlements were at 5%, consistent with last month’s analysis. 
  • Three-quarters of pay settlements higher than 2022. A matched sample analysis found that around three-quarters (75.7%) of settlements were higher compared to the offering provided to the same employee group last year. 
  • Interquartile range decreases. The interquartile range (the middle 50% of pay awards) remains wide at four percentage points, but the lower quartile drops to 4% and the upper quartile to 8%. For comparison, last month the interquartile range stood a percentage point higher at between 5% and 9%.  
  • One in 10 deals above 10%. Whilst the median award decreased slightly this month, we continue to record high settlements. Around one in 10 (10.5%) of awards this month were above 10%, with the highest standing at 13.6% 

Public sector pay rises: 

The median basic pay award for the public sector in the year to the end of July 2023 rose to 5%, a notable shift from a year ago where the median award stood at 3.2% in July 2022. Over the same period, pay awards in the private sector were worth 6%.  

Last month, the government announced that they accepted the recommendations from the independent pay review bodies, which will see groups including the armed forces, prison officers, senior civil servants, teachers, police officers and doctors and dentists receiving pay awards of between 5% and 7% in 2023. However, for many this will still be a real-terms wage cut against current inflation levels.

Sheila Attwood, XpertHR senior content manager, data and HR insights, said:
“While the ONS announced last week that pay growth has hit a record high, our figures indicate that pay awards are likely to have hit their peak, as our research records a fall in the median pay award for the first time this year. However, both sets of data show that pay is still lagging behind inflation, leaving many employees struggling to manage the cost of living. 

“A narrower gap between pay awards and inflation is certainly on the horizon, and while our figures of a decrease in wage rises might ease minds at Bank of England, fearful of the effects of a wage-price spiral, for employers there is room to provide more support. Aside from pay, employers need to consider other avenues to not only support employees but retain them too – so looking at benefits offered, training and development implemented, and flexibility granted.” 

Read the full article here

Trending