Two-fifths of pay increases are worth 6% or more

Around two-fifths of employees received pay rises worth 6.0% or more in the three months to January 2023, according to the latest monitoring figures from Incomes Data Research (IDR). An analysis of 75 new pay deals implemented between 1 November 2022 and 31 January 2023 also revealed that the median pay award across the economy is 5.0%. The median has held steady at this level since November due to a continued proportion of higher-end awards, worth 5% or more. 

“We have observed large pay uplifts across the private sector in areas such as engineering, retail and parts of transport, storage and distribution with some employees receiving basic increases in excess of 9%”, commented Zoe Woolacott from IDR. 

Pay rises higher in private services than in rest of private sector

Firms in private services are making some of the highest pay increases across the economy, with nearly half (47%) of awards in this sector worth 6% or more. In this sector the upper quartile, the point which a quarter of increases are at or above, is 6.9%, which is higher than the respective figures for manufacturing and production, and not-for-profit. 

“Such relatively high increases are likely to continue further into 2023 due in part to the influence of the forthcoming uplift in the National Living Wage, which will rise by 9.7% on 1 April 2023 to £10.42. But continued tight labour markets and elevated inflation will play a role too”, commented Woolacott.

 Some employers are awarding additional or interim pay increases in the same year, particularly banks and supermarkets. Such decisions have been taken largely to alleviate recruitment and retention challenges and stay ahead of competitors on pay. Early signs show that this type of response to pay pressures may well continue in 2023 as long as labour markets remain tight and inflation remains elevated compared to previously.

Manufacturing firms dominate the majority of pay reviews at the start of the year – they account for more than two-fifths of settlements in this sample. The median pay award in manufacturing and production is 5.0% and two-thirds of increases were worth 4.0% or more. This is a much larger proportion when compared to the same period in 2022 when just a quarter of awards were at this level and the median was only 3.0%. relatively high increases are common among engineering firms, particularly those in car manufacturing.

The latest pay settlement figures are based on a sample of 75 awards effective between 1 November 2022 and 31 January 2023, mostly at large organisations and together covering over half a million employees. Very few awards in the sample are from the public sector and therefore the results predominantly reflect the picture in the private sector.

Note for Editors

Incomes Data Research monitors pay reviews across the economy throughout the year and publishes findings in ‘Pay Climate’, our quarterly e-bulletin, with additional monthly updates on our website: https://www.incomesdataresearch.co.uk.

Our data is used by all those concerned with decisions on pay, including employers in the private and public sectors, government bodies, trade unions and economists. We have conducted research for a wide range of clients including the Low Pay Commission and the Office of Manpower Economics, as well as for a range of employers and employee representative organisations.

For any queries relating to this research please contact Zoe Woolacott on 01702 669549 or at zoewoolacott@incomesdataresearch.co.uk.