What is driving the upward pressure on wages?
With rising inflation and a shortage of applicants, salaries are rising. But how long can that last, and have employers’ payroll budgets increased as much as the research suggests? Ashleigh Webber explains what is driving current salary trends.
Reports from organizations offering astronomical starting salaries this year may have set employers’ hearts racing over the past two weeks. After all, we are still emerging from the pandemic which has seen £80.37billion disbursed in government commercial loans, leading to an acceleration in business costs. Recruitment consultancy Robert Walters said payroll budgets in the professional services sector had jumped 10-15%, the biggest increase seen since 2008, while rewards specialist Willis Towers Watson said placed the average salary increase budget forecast at 3.2% – the two staggering increases considering salary settlements averaged 2% in 2021 and few salary increases were seen in 2020. Traditionally, organizations have tried to match inflation in their annual wage settlements, but with the consumer price index currently at 5.1% – with the Bank of England predicting it will rise to around 6% by spring – many will wonder if this practice is realistic. What’s really going on with compensation right now? Do headlines around wages last week suggest employer optimism that may not translate into action once they factor in inflation, rising energy costs and upcoming wage increases? national insurance bills from employers? For Steve Herbert, head of benefits strategy at Howden Employee Benefits & Wellbeing, claims of big pay rises in 2022 are overblown. “Many organizations are simply not able to do this. That’s not to say they won’t in the long run, but they’re definitely not in a position to pay top dollar right now,” he says. “We have employers who have had a few years where they have been below profit targets and budgets, lower productivity and below expectations due to the pandemic. Many found themselves with a lot of debt and loans that they had to take on just to survive; and in april