The number of organisations operating pay freezes has fallen from 23 per cent in 2020 to 14 per cent this year and is expected to drop to just three per cent in 2022. It is worth noting that 18 per cent of respondents think it is too early to tell what their pay review budget will be, however it is clear optimism is high.
There have been huge financial challenges facing businesses as a result of the pandemic, but our latest Reward Management Survey indicated that employers were starting to see the first signs of optimism in the labour market. There will be organisations who want to make up for pay freezes in 2020. If employers did not go ahead with pay reviews last year, they will be concerned at the prospect of two consecutive years of pay freezes or incremental pay increases, so news of higher revenue predictions for the year ahead will be welcomed.
Targeting pay actions
Almost a quarter of employers plan to offer an across the board pay increase in 2022, slightly down on the one in three respondents to our UKRMS in spring 2021 who planned to use this approach. 36 per cent plan to implement a combination of across-the-board pay rises and individual increases, which has been popular for a number of years as a way of tailoring pay awards to certain individuals and groups. The emergence of organisations preferring to make a blanket increase may in part be driven by the pandemic, where there has been a sense that everyone is in this together. Only one in five respondents are looking to make individually determined increases.
Some customers have anecdotally reported senior management taking pay cuts, forgoing bonuses and providing access to greater financial advice to support those paid less in the organisation throughout the pandemic. There were reports that the National Living Wage had necessitated pay increases for certain roles in organisations where they were operating pay freezes, demonstrating the effectiveness of this measure and the budgeting required for certain roles that are subject to regulation.