UK employers plan to give their staff an average annual pay rise of 2.9% next year amid signs of a strengthening labour market after the turmoil of the Covid-19 pandemic.
Research by Willis Towers Watson reveals the rise is up on the 2.4% average increase paid this year.
With inflation forecast at 2% in 2022, provides workers with nearly a full percentage point real terms increase. The proportion of businesses expecting to freeze pay is set to fall from around 10% this year to 1.7% in 2022.
Willis Towers Watson says some sectors plan to be more generous than others. Average rises in 2022 are set to be higher in the media at 3.3% rise, leisure and hospitality at 3.2%, and high tech at 3.1%. Workers in banking with 2.3%, automotive at 2.4% and chemicals with 2.5% are set to fare less well.
In 2021, UK businesses fought to motivate and retain the best talent by paying top performers a pay rise that was 2.6 times greater than that given to those getting average performance ratings, the study reveals.
As the COVID-19 threat starts to recede and the economy starts to recover, we’re seeing significant year-on-year improvements in pay rises,” said Willis Towers Watson data services leader EMEA Paul Richards.
“Overall the outlook for salaries is strong as businesses start planning budgets for 2022 and many are keen to retain top performing staff with performance-related pay as key areas of the employment market start to hot up.” The study reveals 54% of firms said heir business outlook is ‘ahead’ or ‘well ahead’ of where they thought it would be, while just 3% said it was below expectations.
Some 32% plan recruit more staff in the next 12 months, while 7% expect to cut jobs. Nearly half of firms are trying to fill roles in IT and sales - 47% and 46% respectively - while other recruitment hotspots are engineering with 45% and skilled trades at 36%.
“Our data shows that the employment market looks optimistic and the outlook for business is better than many expected,” Richards added. “Many organisations are keen to drive recruitment in sales, IT and roles with technical skills in order to take advantage of the anticipated recovery.”
