Employers expect pay awards will increase to 2.5% next year, report says

Employers are predicting pay awards will rise to 2.5% in the next year, according to a new report.

The increase would be more than the 1.6% median award made in the past year, said wage analysts XpertHR.

Its study found that after a tough start in the first three months of 2021, where the median award was 1.2%, increases jumped to 2% in the second quarter.

This momentum is expected to carry on over the next 12 months as organisations continue to recover from the coronavirus outbreak, said the report.

Most firms expect to increase pay at their next annual review, with a minority either unsure or expecting a pay freeze.

Half of workers expect to receive a higher increase in pay than they did over the past year, said XpertHR.

Pay awards will return to the same level seen in the two years before the pandemic struck if the predictions come true, the report added.

Sheila Attwood, XpertHR pay and benefits editor, said: “For much of the last year, organisations have continued to feel the impact of the coronavirus outbreak and pay awards have remained muted.

“Many employers have reported that Covid-19 is likely to have less of an impact on their future pay plans, with pay awards predicted to increase to 2.5% by September 2022.

“Driving these increases will be a need to respond to the market, with recruitment and retention difficulties pushing wages higher.

“However, while many organisations also believe that some economic recovery will enable them to award higher increases at their annual pay review, others are still concerned about business volumes and are likely to remain cautious.”