Since 2008, Paydata’s bi-annual UK Reward Management Survey has captured relatively flat wage growth. As budgets tracked gradually rising inflation at two per cent over the past decade, the rising cost of living had already produced an uplift to three per cent, which inflation has soared past. The Consumer Price Index is currently 11.1 per cent and employers are considering how they address this hike.

In 2022 with inflation driving up the cost of living, more employers are considering higher increases, with nine per cent giving pay increases over five per cent – increasing from one per cent last year who were considering this level.

Higher levels of pay awards
Nine per cent of respondents reported operating a pay freeze in autumn 2021 – now none of the respondents are considering this. Only five per cent are considering two per cent increases, in contrast to 38 per cent last year, as respondents are now more evenly split between up to three, four and five per cent increases.

The number of respondents offering up to three per cent pay increases has remained stable, with 32 per cent granting this level last year and 34 per cent now giving up to three per cent increases. However, only three per cent of respondents gave up to four per cent increases in autumn 2021 which has risen to 28 per cent in 2022. Similarly, only three per cent of respondents gave up to five per cent increases last year – nearly one quarter of respondents are reporting an up to five per cent pay increase in autumn 2022.

Additional support
Notwithstanding the higher pay reviews in 2022 that Paydata has captured, employers are turning to second pay reviews and lump sum payments to supplement their employees’ income, showing that employers are not just acting to rectify weak pay awards. Organisations genuinely seem to be striving to offer what support they can.

10 per cent of respondent employers are considering a second pay review in 2022, whilst 11 per cent are already offering a second pay review in 2022; the median additional pay award is up to three per cent. 46 per cent are targeting the lowest paid to give them greater levels of support. 16 per cent say the second pay review applies to everyone, whilst five per cent say that everyone will be included, but the lowest paid/levels will receive more.

For those who opted for ‘other’ measures of support, they report offering a cost of living payment or one-off bonus to support people. Others are offering an additional pay award for low earners or a fund to be used at managers’ discretion to target support to those who require this the most.

One-off cost of living payments to support rising costs facing employees
Respondents were also asked whether they had, or planned to, pay a lump sum to address the increased cost of living. 23 per cent of employers are paying an additional cost of living lump sum to support people, with £750 being the median amount. One in four offer this to all staff, whilst 40 per cent are providing this to lower paid employees.

The CIPD has warned of the need to factor in whether these payments could adversely affect those accessing benefits, such as Universal Credit. Employers must ensure that they factor this into any targeted support plans.

Evidence-based pay and reward frameworks
A tiered approach to support reported by organisations trying to target support also raises questions about how best this can be done in a fair, objective way. Some are reporting certain salary brackets and laddering support, yet bands or grades might be a fairer, more objective way of administering support.

49 per cent of employers are taking the opportunity to review whether their reward framework is robust enough to support employees in a consistent, fair way. An evidence-based reward strategy that provides meaningful remuneration, while being affordable for the business, can ensure that people feel fairly treated and appropriately supported during turbulent times.