By September 2022, pay will have increased by an average of 2.5 percent

According to the most recent data from XpertHR, private-sector employers expect pay awards to grow to 2.5 percent in the 12 months leading up to the end of August 2022, up from 1.6 percent the previous year.

Following a difficult start in the first quarter of 2021, when the median award was only 1.2 percent, pay awards increased to 2% in the second quarter. As organizations recover from the coronavirus pandemic, this momentum is projected to continue over the following 12 months. The majority of respondents (84.8 percent) predicted a wage raise at their next annual review, with the rest undecided or expecting a pay freeze. Furthermore, more than half of employees (50.4 percent) are expecting to receive a greater wage raise than they did the previous year.

If this prediction comes true, salary awards will recover to the levels seen in the two years prior to the epidemic.

The following are some of the key salary forecast findings for the year ending August 31, 2022:

• Median returns to pre-pandemic levels. Employees in the private sector are predicted to receive a 2.5% pay increase over the coming year, up from the 1.6% recorded over the previous year.
• Deals closely bunched. The middle half of pay awards are expected to fall between 2% (the lower quartile) and 3% (the upper quartile), demonstrating a bunching of awards around the median.
• Wage standstills almost frozen out. Among those organisations that were able to provide a forecast of their next pay award, only 7.8% cited a pay freeze.
• 2% most common prediction. Almost a quarter (24.1%) of pay award forecasts for next year are at exactly 2%, followed by a 3% predicted increase (20.4%).
• Sectors in line. Employers in both manufacturing-and-production and private sector services are predicting a median 2.5% pay award. In both sectors the middle half of pay awards are expected to sit between 2% and 3%.

Pay award estimates for the next 12 months, ending August 31, 2022

Findings from the most recent pay awards

XpertHR reported a median basic pay award of 2% in the three months leading up to the end of September 2021, a level that has remained consistent for the past six rolling quarters. XpertHR’s examination of 84 wage settlements covering more than 1.2 million employees also reveals:

• Pay freezes still a feature. In the current quarterly sample of pay awards, including basic salaries and performance-based payments, the proportion of pay freezes stands at just one in 12 (8.3%).
• Six in 10 pay awards higher. Among a matched sample of pay awards, six in 10 (60.9%) employee groups received a higher award than in the previous year. Fewer than a third (26.6%) received a lower award, and just one in eight (12.5%) received the same.
• Public-sector deals fall behind. In the year to the end of September 2021, pay awards in the public sector are worth 1.5% at the median, down half a percentage point on the previous rolling year, and down one percentage point from the 2.5% recorded a year ago. In the private sector, pay awards have edged up by 1.7% (from 1.6% in the year to the end of August 2021), putting them ahead of the public-sector.

Sheila Attwood, XpertHRpay and benefits editor, said:

“For much of the last year, organisations have continued to feel the impact of the coronavirus outbreak and pay awards have remained muted. However, many employers have reported that Covid-19 is likely to have less of an impact on their future pay plans, with pay awards predicted to increase to 2.5% by September 2022.

“Driving these increases will be a need to respond to the market, with recruitment and retention difficulties pushing wages higher. However, while many organisations also believe that some economic recovery will enable them to award higher increases at their annual pay review, others are still concerned about business volumes and are likely to remain cautious.”