Wages continued to drop across the UK in the first quarter of this year, according to the latest ONS figures. However, many pay experts claim this may be relatively short-lived effect with companies now starting to look more seriously at higher pay awards to help employees cope with rising inflation.
The ONS figures, published in its regular market overview, show that while wages are slipping, there is better news on employment, with the number of people unemployed now at the lowest level fo 50 years.
This drop in wages coincides with rising inflation, help to create a cost of living crisis, particularly for many of those on lower incomes. However pay and pension experts remain more optimistic that wages may start to pick up again in the near future.
Willis Towers Watson pay expert Alasdair Wood says that many companies took a ‘wait and see’ approach in the first few months of the year, when inflation was expected to be relatively short lived. As a result they may not have increased wages in line with the rising cost of goods and services.
However this strategy is starting to change, as economic forecasts, and the ongoing situation in Ukraine make it clear that inflationary pressure looks set to worsen, and may be a problem for a longer period of time. Yesterday the Bank of England’s government Andrew Bailey warned of “apocalyptic” food price rises, due to the Ukrainian situation.
Wood says these warnings and forecasts are now feeding through to HR departments: “We are now seeing an uptick in activity focused on alleviating pressure on the lowest paid in particular.”
He says examples of this include increasing pay budgets, accelerating pay rises and access to earned pay, one-off adjustments and expanded use of recognition awards.
He adds: “We expect that these actions will become more common and will start to make a greater difference in the second half of the year. If inflation stays high, we also expect higher pay budgets as we head into year end and at the start of 2023.”