Salaries for professionals could increase by as much as 25 percent in the first quarter of this year, as companies fight to hold onto their best staff.
According to the findings from the Robert Walters 2022 UK Salary Guide, professional services firms are planning to increase their budget for pay raises by 10-15 percent. It is the biggest increase seen since 2008 and almost three times the rate of inflation.
At least five percent of the increase in payroll budgets will be reserved for existing employees, though the biggest pay rises will be reserved for new starters.
These raises are expected to be for workers across all seniority levels – from entry-level workers and temporary staff right through to management level and executives.
Pay Rises for Retention
Almost half of companies (43 percent) from the survey said they are planning salary increases for current employees to keep pace with higher pay they have awarded new hires.
This correlates with surveys with workers, with more than half (54 percent) expecting a pay rise this year after a two-year salary freeze in most places.
In fact, two thirds saidd that they will leave their job if they are not rewarded fairly, with 75 percent 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 percent, and for those professionals who moved into ‘hero industries’ such as technology or health care saw pay hikes as high as 15 – 20 percent.
Chris Poole, Managing Director at Robert Walters UK said there has been a pattern: “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.”
However, he warns this could alienate existing workers: “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.”
Soft Perks Growing Stale
According to the 2022 UK Salary Guide, it is excellent compensation & benefits (65 percent), a desirable bonus scheme (53 percent), and job security (40 percent) which are the top three values of a post-pandemic professional.
In fact, flexi-hours (29 percent), remote working (22 percent), and holiday entitlement (20 percent) all rank much lower in importance for professionals – perhaps because over half of white-collar workers (53 percent) saidd 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 percent) said this is an important factor in staying on or taking on a new role.
Inflation plays a role
Over a third of businesses (39 percent) 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.
Mr Poole said that as companies decided their 2022 salary budgets before there was a clear picture of how wages should be for new hires as well as how inflation would impact the labour market.
He said: “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.
But added: “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.