Inflation hits UK salaries
- Payroll budgets to increase by 10-15% this year, the largest increase seen since 2008
- New starters salaries increased by 6-15% in 2021, whilst pay for existing employees remained flat
- 43% of companies planning pay rise for existing employees to match wages of new starters
- Over a third of businesses (39%) plan to increase pay to keep up with rising inflation
- Excellent compensation & benefits (65%), desirable bonus scheme (53%), and job security (40%) ranked most important by professionals looking for work this year
- Half of professionals claim they don’t ask about flexi-working in an interview as they assume “it is a given.”
The war for talent shows no sign of relenting. The latest Robert Walters 2022 UK Salary Guide is out now: demonstrating clear signs of wage inflation.
Salaries for white collar professionals will rise by as much as 25% in the first quarter of 2022, as organisations battle to hold on to their best workers in the post-Omicron boom.
Professional services firms are planning to increase their budget for pay raises by 10 to 15 per cent this year - the largest increase seen since 2008 and almost 3 times the rate of inflation.
Salary hikes for retention
Almost half of companies (43%) from the Robert Walters survey said they’re planning salary increases for current employees to keep pace with higher pay they’ve awarded new hires.
Part of this is overdue increases, following two-years of salary freezes. Over half (54%) of workers state that they are expecting a pay rise, in response to the backlog.
The hot jobs market means employers may have no choice but to reward existing workers. Two thirds stated that they will leave their job if they are not rewarded fairly, with 75 per cent feeling ‘very confident’ about job opportunities in their sector this year.
Wage Compression Hits
In the past year wages for new starters grew by 6-8 per cent, and for those professionals who moved into ‘hero industries’ such as technology or health care saw pay hikes as high as 15-20 per cent.
Chris Poole, Managing Director at Robert Walters UK comments:
“Wage increases above market value for in-demand hires was a recurring theme of the past year. As a result, we saw new starter salaries outstrip those of existing employees.
“The consequences of this will result in ‘wage compression’ – where existing employees feel their additional experience at the company (over new starters) is no longer valued or has not grown in value over the past two years.
“Looking at the year ahead we will see more companies raise the pay of their existing employees to sit in line with new starter salaries.”
What workers want
It's not just salaries that are increasing.
According to the 2022 UK Salary Guide, it is excellent compensation & benefits (65%), a desirable bonus scheme (53%), and job security (40%) which are the top three values of a post-pandemic professional.
In fact, flexi-hours (29%), remote working (22%), and holiday entitlement (20%) all rank much lower in importance for professionals – perhaps because over half of white-collar workers (53%) stated that they “wouldn’t bother” asking about flexi-working in a job interview in the coming year because they naturally assume “it is a given now.”
Gym discounts, company cars, and voucher schemes have all been traded in for the hope of “inspiring colleagues and company culture” – with over a third of workers (37%) stating this is an important factor in staying on or taking on a new role.
Inflation plays a role
Over a third of businesses (39%) said they’re increasing pay to keep up with rising inflation, but recruiter Robert Walters warns that companies may find themselves in a ‘wage-price’ spiral in the coming year – whereby higher prices and rising pay feed into each other and accelerate even more.
Chris Poole adds: “Many companies decided on their 2022 raises a few months ago before we had a clear picture of how much rising wages for new hires, as well as inflation, would impact the labour market.
“There is little point in companies offering a pay rise as a morale booster if the impact of that increase isn’t really felt in the real world – and so we are increasingly seeing more companies consider the cost-of-living when determining the average pay rise an individual gets.
“Businesses will have to decide how much to raise their salaries to keep their employees, whilst also deciding how much to pass on those costs to their clients and consumers.”
Click here to download a copy of the Robert Walters 2022 UK Salary Survey.