‘Real pay’ has dropped at the fastest rate on record, as inflation and the cost of living continue to soar, new figures show.
The latest data from the Office of National Statistics shows that between April and June 2022, when adjusted for rising prices, wages fell by three percent.
The rise in prices has seen the UK inflation rate rocket to a 40-year high, and this is only expected to keep rising.
The growth in regular pay, excluding bonuses, was 4.7% in April to June 2022. This is the fastest growth in 15 years (excluding during the pandemic). However, prices are rising even quicker, resulting in a fall in pay of about three percent.
This rising cost of living has prompted calls from workers and unions for pay rises, with some sectors, such as the rail industry, taking strike action in recent weeks.
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‘Labour market starting to slow’
Joanne Frew, Interim Global Head of Employment and Pensions at DWF, said: "There are indications that, as suggested last month, the labour market is starting to slow with the number of job vacancies in May to July falling by nearly 20,000. This is the first fall in vacancy numbers since June to August 2020 although the figures are still almost 1,000,000 higher than the all-time low experienced in April to June 2020 at the height of the pandemic. The statistics suggest that smaller businesses are changing their recruitment practices more quickly than larger companies, with the decrease in vacancies being driven largely by companies with fewer than 50 employees. However, the number of redundancies remain low at 1.9 per thousand employees.”
‘Great resignation remains an issue’
Frew went on: "The 'Great Resignation' remains an issue for employers. Although movement from job to job has fallen slightly, it remains high and the data suggests that this movement is driven largely by resignations and job changes by choice, rather than dismissals. Consequently, the pressure remains on employers to find new and innovative ways to present themselves as the employer of choice to prevent their talent leaving. Good benefit packages, flexible working, a supportive culture and development opportunities within the business continue to be important to both attract and retain staff."
How does HR weather the storm?
The new data reignites the ongoing debate on salary increases. In a world where many businesses can’t increase pay in line with the rising cost of living due to the acceleration (and the other increasing costs to businesses generally such as energy) how else can companies supporting struggling employees who are suffering financially despite working hard.
Hannah Copeland, HR Business Partner at employment law and HR support firm WorkNest, said: “Whilst competitive wages are undoubtedly up there when it comes to engaging and retaining good people, it may not always be practicable for employers to keep up with inflation.
“However, employers have a key role to play in helping employees and there are other things businesses can do to try and ensure money is less of an issue.
"Employee Assistance Programmes (EAPs) are a key investment for many businesses. These are somewhere that employees can go to get support in a huge variety of areas such as mortgage advice, financial planning, debt management alongside many other unrelated issues. Many EAPs will also supply counselling for employees which tackle the emotional challenges of managing finances. EAPs are commonly supplied by a third-party supplier but businesses will be instrumental in setting the scheme up and making sure it offers services which are valuable to employees.”
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New workplace dynamics such as ‘The Great Resignation’ and ‘Quiet Quitting’ have appeared and, some would argue, quickly disappeared.
Talent shortages have become even more pronounced. And all of this against a backdrop of huge social, political and economic turbulence, and a cost-of-living crisis which is impacting a growing proportion of workers.
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Copeland went on: “Employers must be also open and transparent when it comes to pay reviews. Even if the review doesn’t lead to a pay rise, then it is vital that this is communicated and some thought has gone in to looking at salaries and considering whether a pay rise could be applied. Yearly pay reviews are recommended unless your business operates performance related pay, in which case, individual objectives can be linked directly to business performance. In this situation, employees become more able to control their income based on what they deliver. Companies must not fall into a trap of offering pay rises based on individual needs. There should be clear structure surrounding pay and promotion.
“Employers may feel more able to consider whether they can support individuals financially on the basis of their broader benefits offering. Flexibility here is key and HR expertise is capable of helping companies to understand whether there is scope in the business to offer things like interest free loans for buying season tickets for travel or creating tax savings through salary sacrifice schemes.
"There may also be schemes that already exist within the business which employees don’t know about such as shopping discount schemes. Employers have an important role here in communicating what is available and encouraging maximum uptake.”
