Over half of employers likely to increase pay by 5% or more next year
More than half of employers anticipate awarding a pay rise worth 5% or more in 2023, according to IDR’s poll of 181 mostly medium and large-sized private sector employers. Just over half - some 53% - said they intend to award increases of at least 5%, with a quarter intending to make awards at a level just below this, between 4% and 4.99%. The results of our poll reveal insights on employers’ pay intentions for 2023 and indicate that continued upward pressure on pay is likely to deliver higher pay rises next year when compared to 2022. Almost three-quarters (72%) of the sample anticipate that the level of pay rise will be higher next year when compared to 2022. Meanwhile, 15% said that the level of pay rise in 2023 is likely to be the same as the level of increase awarded in 2022 and just 13% of employers in the sample expect that pay awards in 2023 will be lower when compared to this year’s outcome.
Inflation and labour market pressures
All 181 participants were asked to indicate the main influences on their organisations’ pay decisions for 2023. Higher inflation and increased labour market pressures proved to be the top two factors with over four-fifths of respondents citing these as one of the main influences – 86% and 82% respectively. The third most influential factor in pay decisions for the coming year is employee motivation and morale, as indicated by 68% of participants. This proportion has grown from 55% in a similar poll we conducted regarding pay intentions for 2022 and highlights the continued challenges respondents face in respect of engaging their workforces.
The next most influential factor was the National Living Wage (as cited by 39% of employers in the sample), while a smaller proportion (27%) indicated that the voluntary ‘Living Wage’ was an influence on their pay decision for 2023. Profitability came lower down than most of these overall, and while we offered the option of ‘reduced labour market pressures’ to those who might have been experiencing this, none took it up, indicating that tighter labour markets are widespread. Other factors specified by employers include staff retention and trade union activity.
Pay trends in 2023
The results from the poll echo the current findings from IDR’s monitoring of pay trends. An initial look at already-decided outcomes for 2023 shows that the median pay award across the economy currently stands at 4.3%. Higher-end awards worth 5.0% or more represent over two-fifths (41%) of deals effective in 2023 so far – up from around a third of awards in 2022 when the overall median was 4.0%.
The latest pay settlement figures are based on a sample of 46 awards effective between 1 January and 31 July 2022, mostly at large organisations and together covering over 260,000 employees. Very few awards in the sample are from the public sector and therefore the results predominantly reflect the picture in the private sector.
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IDR will continue to monitor pay trends in 2023. Contribute to the research by completing our online survey with details of your organisation’s pay rise. All participants will receive a free copy of our next article.