Why time is running out to get a pay rise
Against a backdrop of soaring interest rates, sky-high inflation, and hefty taxes, it seems the only way to escape the cost of living crisis is simply to be paid more.
At first glance, it harkens back to the economic backdrop of the 1970s when a combination of low unemployment and high inflation led to a wage-price spiral, where wages rise alongside consumer prices.
But those hoping wage growth will match inflation any time soon are in for a rude awakening, experts warn.
Backin the 70s, unions wielded far more power, and one only has to look at the drawn-out battles taking place on picket lines to see how that is no longer the case.
Furthermore, the wealth of job vacancies in 2023 is largely the result of a labour market still recovering from covid lockdowns – but according to economists, time is running out for workers with itchy feet and tight budgets.
“Right now, conditions are favourable for candidates because we’ve still got high levels of job vacancies across the market,” said Jack Kennedy, of job site Indeed.
According to data from the Office for National Statistics, vacancies are still 36pc higher than they were pre-pandemic despite recession fears. Recent mass layoffs in the tech sector, Mr Kennedy added, were an outlier, and redundancy notifications are low.
“It’s still a candidates’ market,” he said. “We are starting to see a little softening but given where it has been starting from it’s still got a long way to go.”
Employers are still battling to secure talented staff, meaning for workers looking for a salary bump to cope with cost of living pressures should “strike while the iron is hot”, Mr Kennedy said.
He added: “Candidates should be taking advantage of the current market conditions”, he said. “If you wait until later in the year when the pitch might have softened somewhat it might not be safe to bargain for a pay rise.”
Indeed’s data shows that those who switch jobs are far more likely to secure pay rises quicker than those who negotiate them with existing employers. But Mr Kennedy said an increasing number of candidates were deliberately seeking out jobs to force their existing employer’s hand into making a more attractive counteroffer.
But recruiters say this tactic can be risky. Abby Robbins, of recruitment firm Yellow Bricks, said an employee that goes through the process of seeking out another job, securing an offer, and handing in their notice “has already broken the psychological contract” with their employer.
“A lot of people who take the counteroffer end up regretting it because they put in all that work to resign,” she said. “If they’ve had a high counter offer it can actually make things worse because they’ve had to apply for another job to be taken seriously.”
Recruiters, for their part, try to suss out if a candidate is “playing along” with the process with the ultimate aim of securing a high counteroffer from their current employer. But Ms Robbins said there had been an increase in candidates rejecting new jobs after being offered a pay rise.
“As an agency, we keep in touch with candidates we’ve placed in the past,” she said. “If they complain about not getting a pay rise I sometimes lightly tip a manager off and let them know there’s a risk – we want people to be paid what they’re worth.”
Negotiating higher pay at a new job can still be tricky, however, as job adverts are often vague about salaries. According to Adzuna, another job site, roughly one in 10 jobs invite “salary negotiation”. Just 60pc of job ads disclosed a salary in 2022, down from 64pc in the previous year.
Paul Lewis, of Adzuna, said: “While many employers may mark salaries as ‘competitive’ to avoid being explicit on pay ranges, it’s also a tactic that perpetuates bias in the jobs market.”
We know that generally women and minorities find it more intimidating to negotiate salaries, especially as pay gaps mean they’re often paid less to start with. The risk is that inviting negotiation on pay can widen existing bias within organisations.”