As inflation impacts the cost of living, four in ten employers are planning to boost pay budgets for staff, according to a survey by WTW.
Recent ONS data revealed that wages are failing to keep pace with rising prices, despite job vacancies outpacing unemployment.
The average wage (excluding bonuses) has grown by 4.2 percent, but when counteracted by the impact of inflation, growth in pay fell, in real terms, by 1.2 percent.
What measures are employers taking?
In response to the current inflationary environment, WTW research found organisations are most likely to support their staff by reviewing pay more frequently than the usual annual review (14%), as well as promoting the use of existing benefits (13%) (such as childcare vouchers and healthcare and insurance cover discounts) and offering employees financial wellbeing support (13%).
In total, almost a third (31%) of employers plan to take some measures to help employees deal with the challenges of rising inflation.
Yet, despite rising inflation, employers are still willing to pay to secure employees with in-demand skills, as almost a quarter of organisations (24%) focus pay budgets on ‘hot-skilled’ workers.
In addition, one-in-five organisations (19%) are prioritising increasing pay for those on lower salaries, in response to rising inflation.
WTW speculates that the impact of low wage growth is likely to be felt most acutely by middle earners, signalling that the issue of inflation will not be resolved with a ‘one-size-fits-all’ response.
What happens if inflation continues to soar?
“While many companies took a ‘wait and see’ approach in the first few months of the year as inflation was expected to be short-lived, we are now seeing an uptick in activity focused on alleviating pressure on the lowest paid in particular,” says pay expert at WTW, Alasdair Wood.
“Examples include increasing pay budgets, accelerating pay rises and access to earned pay, one-off adjustments and expanded use of recognition awards. 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,” adds Mr Wood.