UK businesses are planning inflation-beating pay rises averaging 2.9 per cent in 2022 as pay freezes disappear and optimism returns, a major survey by Willis Towers Watson has found.
The rise is an improvement on the 2.4 per cent average increase paid this year and, with inflation forecast at 2 per cent in 2022, provides workers with nearly a full percentage point real terms rise. It comes as the proportion of businesses expecting to freeze pay altogether is set to fall from over 10 per cent this year to 1.7 per cent in 2022. 725 UK firms took part in the study about salary budgets and recruitment
Average rises in 2022 are set to be higher in the media, where a 3.3 per cent rise is predicted, leisure and hospitality, up 3.2 per cent, and high tech, up 3.1 per cent. Workers in banking are expected to see a 2.3 per cent rise with automotive up 2.4 per cent and chemicals up 2.5 per cent.
In 2021, UK businesses fought to motivate and retain the best talent by paying top performers a pay rise that was 2.6 times greater than that given to those getting average performance ratings.
The study revealed clear signs of optimism and recovery among employers. Over half – 54 per cent – of UK firms said their business outlook is ‘ahead’ or ‘well ahead’ of where they thought it would be, while just 3 per cent said it was below expectations.
And a third – 32 per cent – plan to recruit more staff in the coming 12 months, while less than 7 per cent expect to cut headcount.
Willis Towers Watson data services leader EMEA Paul Richards says: “As the Covid-19 threat starts to recede and the economy starts to recover, we’re seeing significant year-on-year improvements in pay rises. Employees in some industries are faring better than others, but these are often the industries that were hardest hit by the pandemic, such as leisure and hospitality.
“Overall the outlook for salaries is strong as businesses start planning budgets for 2022 and many are keen to retain top performing staff with performance-related pay as key areas of the employment market start to hot up.
“Our data shows that the employment market looks optimistic and the outlook for business is better than many expected,” said Richards. “Many organisations are keen to drive recruitment in sales, IT and roles with technical skills in order to take advantage of the anticipated recovery.”
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