Pay review in a pandemic

What’s happening in the market

Like many organisations, lots of our clients review their pay in the first quarter of the year.  As part of their preparation, they’ll ask us what is happening in the market.  Not surprisingly, it’s a question that is top of the list this year.

Here is a quick round up of some of the helpful published data:

2021 predictions

The CIPD published their quarterly Labour Market Outlook report in January 2021.  This regular forward-looking report shows pay review intentions for the coming year.  The overall base pay increase prediction for the next 12-month remain at 1%.  By sector:

  • the private sector has shot up from 0% last quarter to 1.5%
  • the public sector backtracked from 2% to 0% (a likely result of the Chancellor’s Spending Review)
  • the voluntary sector fell slightly from 1.7% to 1.4%
  • the proportion of employers planning to postpone a pay review in the next year remains high (28%) and is particularly prevalent in hospitality (46%) and business services (33%)

Kornferry has published their 2021 Global salary survey and the predictions for 2021 indicate:

  • of UK organisations awarding salary increases, the award is lower than last year at 1.9%, compared to 2.5% in 2020. If organisations predicting pay freezes are excluded, the 2021 figure is 2.3%
  • globally only 35% of organisations plan to implement pay awards for all employees with many taking a more targeted approach (33% plan to award increases to 50% of employees or fewer)

Willis Towers Watson also published some pay predictions for 2021 which:

  • predicts fewer pay freezes in the private sector (only 3%) compared to 2020 (33%)
  • average pay budgets of 2.4% compared to 2.2% awarded last year
  • anticipate a more targeted approach to pay awards rather than across the board increases

It’s worth noting that Kornferry and Willis Towers Watson survey participants are likely (although not exclusively) to be multinationals.

2021 actual data

The Government’s autumn 2020 Spending Review, set out a pay freeze for all those working in the public sector in 2021 apart from NHS doctors and nurses and low-paid staff (those earning less than £24,000).

A National Living Wage increase of 2.2% was announced in November 2020 (effective April 2021).

The January 2021 Average weekly earnings report from the Office of National Statistics reports on data collected between September and November 2020.  Although it shows an increase in average UK weekly earnings of 3.6%, the data is skewed by many low paid jobs in retail, hospitality etc. that have been lost.

XpertHR has published data for the three months to the end of Jan 2021 showing:

  • the first pay awards effective in 2021 are lower than those recorded throughout 2020
  • in the three months to the end of January 2021 the median pay award is 1%
  • nearly 80% of pay awards in the latest three-month period are lower than the same group of employees received a year earlier
  • pay freezes remain at about 33%
  • private sector participating companies are predicting median awards to be 1% which is in line with the actual reported above

Of course, this is only one factor in your decision making and much will depend your industry, sector, performance and affordability. There’s certainly a lot to be thinking about this year.

If you’d like help articulating a clear pay and reward strategy, please do get in touch for an initial conversation.  

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Image courtesy of smeloans