New research suggests recovery in terms of pay with half of employers anticipating they will be awarding higher pay rises next year.

According to new data released by the Incomes Data Research (IDR), many employees will benefit from higher pay rises in 2022 with half of employers intending to award this.

This contrasts significantly against the results of the same survey conducted in 2020 in which half of employers were predicting lower pay awards in 2021.



This change is thought to be attributed to various recruitment and retention challenges that businesses have been facing, putting pressure on pay.

Such challenges include a tight labour market where many job vacancies are currently not filled with the number of open roles recently surpassing one million.

Alongside this, there have also been added difficulties with recruiting for technical roles such as technical/IT specialists, engineers, operational specialists and HGV drivers. Call centre operators and customer service advisers were also in high demand.

As such, three in four businesses (75 per cent) cite difficulties in being able to recruit staff while just over half (51 per cent) say retaining employees has been more difficult.

This is a marked increase on 2020, when only under a quarter (24 per cent) reported difficulties with recruitment and fewer than 10 per cent reported problems with retention.

Specifically, seven in 10 employers (71 per cent) share that higher pay on offer at competitors are the most common reasons for retention difficulties which is leading the vast majority of companies (87 per cent) to benchmark their pay levels against the market in 2022.

Ultimately, cost of living has become an increasingly important factor to employers when considering the rate of increase in pay.

Based on the latest forecasts for inflation, this could result in a main range for pay increases of between 3 per cent and 6 per cent.

Zoe Woolacott, who oversees IDR’s pay monitoring activity, commented on this and what this could mean for pay awards:

If this materialises, this will represent a departure from recent pay-setting behaviour, when outcomes were mostly in a lower and narrower range of 2 per cent to 3 per cent.

Pay interventions to deal with workforce issues have tended to be targeted at particular occupational areas, but if inflation rises as predicted, and labour market issues remain as they are or even worsen, this could change.

Ken Mulkearn, Director of Research at IDR, however reflected on the lasting impact of the coronavirus on rewards:

The changes that this has wrought to management-worker relations could be with us for some time.

The element of risk it has injected into previously safe roles means that motivation and morale is more explicit an issue in reward strategy than ever before.


*The full IDR report, ‘Pay Planning for 2022’, is based on research conducted by Incomes Data Research during summer 2021. It includes information from organisations across the UK, together employing a combined workforce of 969,000 employees.



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