Insight 3

The pressure to raise rates of pay is real…

The swinging pendulum of demand and attrition has without doubt impacted wage growth figures. Since their peak in the summer of 2021, the impact of rising inflation has truly kicked in.

See the trends in real terms wages growth rates

By February 2023, real-terms regular pay growth and real-terms total pay growth have been in negative decline for 15 and 10 consecutive months, respectively. Not only has this placed pressure on employers to raise rates amongst new hires, but also within the existing workforce.

UK inflation rose to 10.4% in the 12 months to February 2023

0.4%

…and 10.1% in March alone

0.1%

US inflation rose to 5.0% in February

0.0%

…and 6.0% in March

0.0%

Source: Gattaca analysis of ONS data

From a US perspective, the extraordinary notional wage growth experienced at the back end of 2021 resulted from the need to hire back the vast number of workers displaced at the beginning of the pandemic. Having sharply declined over the last few months (to 7.3% YoY), in February 2023, the impact of inflation means that real-term wage growth, while declining, remains positive.

In contrast, notional wage growth in the Euro Zone rose sharply in Q4 2022, to 5.1% from 3.0% in Q3.

Private vs Public Sector; mind the gap…

In the UK, when comparing notional wage growth between the public and private sectors, historically the private sector has achieved much higher wage growth. However, in recent months, the differentiators between the two sectors have significantly narrowed

Private Sector Total Pay Growth

0

6.5% Oct-Dec 2022

0

6.2% Nov-Jan 2023

0

6.1% Dec-Feb 2023

Public Sector Total Pay Growth

0

4.3% Oct-Dec 2022

0

04.9% Nov-Jan 2023

0

5.3% Dec-Feb 2023

Notional regular pay is experiencing the highest growth rate and is at its highest level within the Finance & Business Services industry, across all sectors.

The ongoing strikes across the public sector have undoubtedly contributed to the narrowing of pay growth differentials. As yet, there isn’t pay parity between the two sectors, however, enhanced public sector pensions make the sector increasingly attractive.

Takeaway

Moving the conversation beyond rates of pay…

Of course, inflationary rises and the cost-of-living crisis will play a major role in both a candidate’s decision making, but also that of existing employees as people seek higher pay to make ends meet.

However, hiring Managers can shift the conversation with prospective candidates by focusing on other aspects of the organisation and role that might be of interest to them.

In our candidate research, contributors cited core renumeration, additional financial benefits such as life assurance and critical illness cover and flexible working (i.e. flexing core hours) as the top three considerations for changing role.

Our recommendation

Discuss opportunities for career growth, work-life balance, job flexibility, company culture, and employee benefits such as health care, retirement plans, or other perks. Employers can also showcase their commitment to diversity, equity, and inclusion in the workplace and highlight the impact their business has on society and the environment. By flagging these aspects, employers can help candidates see the job as more than just a paycheck, which could lead to better engagement and retention in the long run.

Insight 3

The pressure to raise rates of pay is real…

The swinging pendulum of demand and attrition has without doubt impacted wage growth figures. Since their peak in the summer of 2021, the impact of rising inflation has truly kicked in.

From a US perspective, the extraordinary notional wage growth experienced at the back end of 2021 resulted from the need to hire back the vast number of workers displaced at the beginning of the pandemic. Having sharply declined over the last few months (to 7.3% YoY), in February 2023, the impact of inflation means that real-term wage growth, while declining, remains positive.

In contrast, notional wage growth in the Euro Zone rose sharply in Q4 2022, to 5.1% from 3.0% in Q3.