Financial wellbeing | 76% of pay awards in 2023 higher than 2022 levels as firms bid to alleviate cost-of-living pressures

76% of pay awards in 2023 higher than 2022 levels as firms bid to alleviate cost-of-living pressures

More than three quarters of pay awards in 2023 were higher than 2022 levels, as employers bid to alleviate cost-of-living challenges, new research has found.

The latest data from XpertHR shows that, overall, 76% of pay awards in 2023 were higher than the same group of employees received in 2022, with just one in 10 (12.9%) lower.

However, as the first January pay deals filter through, the XpertHR expectation is that pay awards have peaked from last year, with more than half of 2024 deals expected to be lower than those awarded in 2023.

Sheila Attwood, XpertHR senior content manager, data and HR insights, said: “Around a quarter of pay awards take effect in January each year, and we’re just seeing the first of these come through. As per our earlier prediction, the median award amongst these first agreements is at 5%, slightly down on the figure for 2023 as a whole. Overall, almost half of January 2024 pay deals are lower than the same employees received a year ago.

“With pay awards having hit their peak, and employees still dealing with the impact of the rising cost-of-living, organisations will need to find an alternative way to support to staff. One way is by optimising their benefits package. Employers can analyse employee benefit data to identify what is most popular among staff and make sure that what they offer is being used. As well as looking inwardly at their own data, organisations can benchmark against others in the market in order to remain competitive and be sure their package is hitting the right mark.”

Latest rolling quarter findings

Based on 15 settlements representing 43,723 employees with effective dates between 1 October and 31 December 2023 – typically the quietest period of the year for company pay awards as the majority have already been concluded – XpertHR also found that:

  • Narrower interquartile range. The interquartile range spans less than one percentage point. The lower quartile remains high at 5.2%, whilst the upper quartile dropped to 6% — a marked change of pay awards from this time last year when the lower quartile stood at 5% and the upper quartile at 8%.

  • Median pay award remains unchanged. The median pay settlement remains at 6%, consistent with the previous rolling quarter. In 2023, only three rolling quarters had median deals below 6%.

  • Higher pay awards dominate. In a matched sample analysis, over half (54%) of the latest pay deals are worth more than the same group of employees received in 2022.

2023 end-of-year sector review

2023 was nothing short of extraordinary, and reward professionals have had much to contend with. The year began with a jump to a 6% median pay award, the highest since 1991, and while pay deals reached historic highs, they still lagged behind inflation for most of the year.

From 1 January to 31 December 2023, XpertHR analysed 1,018 deals covering approximately 6.3 million employees.

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The findings showed that public services recorded the highest median pay award at 6.5%, half a percentage above the whole-economy median of 6%. This peak follows years of comparatively lower increases in the public sector than in the private sector. Within the public sector, local government led with a 9.2% median, while central government recorded the lowest at 4.5%.

In the manufacturing and production sector, the median pay award for the year was 6%. The lowest increases were seen in construction (5%) and general manufacturing (5.5%), whereas the electricity, gas, and water sectors led with a 7.5% median award.

In private-sector services, the median pay award was also 6%, with facilities, security, and support services experiencing the highest rise at 8%, closely followed by transport and storage at 7.8%. The lowest median award was recorded in the professional and business services industry (5%).

The not-for-profit sector mirrored the whole economy trend with a median pay award of 6%.

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