Inflation in the UK has reached a 30-year high, with projections of a peak of 7.25%. With inflation rising faster than salaries, employees are feeling the squeeze while employers are faced with tight budgets. The National Insurance contribution is also set to rise, which will hit both staff and employers with higher tax bills. The lowest-income families will bear the brunt of this. The rising cost of living is of particular concern to people from lower socioeconomic backgrounds, with 80% of them worried compared to 74% of those from more privileged backgrounds.
As a result, economists predict that average weekly earnings after tax will fall in real terms. Although job vacancies in the UK remain high and the employment rate is strong, high inflation is the top factor set to impact today’s labour market. In general, pay is the most important factor for people in a career. Following pay, flexible working hours and generous annual leave are the top factors for job satisfaction. Employers are struggling to retain and recruit staff due to limited budgets. Over a third of pay rises awarded were between 1-5%, meaning they were lower than today’s rate of inflation.
On a positive note, more than a third (35%) of employers are already providing pay raises in line with inflation, while a significant portion (23%) are exceeding these standards. To address the current market conditions, some employees (22%) suggest the implementation of a one-time bonus, an option already available to 15% of employers.