Pay awards set to remain at 2% in 2021

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Pay award trends seen in 2020 are likely to be repeated this year, with XpertHR predicting that organisations will continue to award pay rises at 2% in 2021.

Its latest research into private sector employers’ pay intentions for 2021 show that just over half (55.5%) of employee groups can expect a pay increase this year, but 7.7% are still likely to see their pay frozen. The outcome for the remaining 36.8% of employee groups is uncertain.

XpertHR predicted a median pay increase of 2% for 2021 – the same level seen over the 12 months to the end of December 2020, and down from 2.5% in 2019. Some 40.2% of forecasts predict pay awards at this level.

Almost one-third (30.3%) of pay awards are forecast to be worth less than 2%, and 7.6% are expected to be worth 4% or higher.

The middle-half of pay awards is expected to fall between 1.5% and 2.3%.

XpertHR pay and benefits editor Sheila Attwood said: “Employers are taking a cautious approach to deciding pay increases, with many still uncertain of the outcome of any 2021 pay review. However, the decision is not an easy one to make. Not only are organisations navigating how to balance staff morale and retention with affordability, they are also trying to work out how their reward strategies fit with new and emerging work models.”

Based on its sample of 170 pay awards for the three months to the end of February 2021, it found:

The median basic pay award across the entire economy was 1% for the third consecutive rolling quarter
Eighty per cent of pay deals were lower than the previous year, while 15% made the same award. Only 5% of employee groups received a higher pay settlement.
A third of pay reviews resulted in a pay freeze
Both the upper quartile and the lower quartile are unchanged, with the interquartile range between nil and 2%. The lower quartile has not shifted from nil for eight consecutive rolling quarters.