The Sunday Times - UK (2022-05-22)

8 The Sunday Times May 22, 2022

BUSINESS

of the research, annual wage-rise settle- ments were consistently coming in at an average of about 2 per cent. That has now risen to 3 per cent, said Boys. “It’s the highest we’ve seen in the last ten years.” His analysis suggests that workers in some sectors are enjoying big pay increases. Finance and professional services wages, for instance, show a total rise of more than 15 per cent. “Even the people who aren’t getting bonuses are getting large nominal pay rises. It’s just that in the face of inflation, it doesn’t cut the mustard,” Boys said. For the private sector as a whole, total pay rose 11.7 per cent in March — though Boys cautioned that this was not a sign of economic strength. “That’s not driven by an increase in profitability or productiv- ity. Ideally what you want in an economy is to get more efficient at doing things, then wages will naturally rise,” he said. The overall average was dragged down

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to staff who can refer chefs — a practice increasingly being adopted by other hospitality venues. This also reflects the recruitment crisis that has gripped the sector as Covid lock- downs eased and workers who had spent long periods on furlough jumped ship to other employers, such as retailers. But it is not confined to hospitality. “Almost all the main economic sectors have seen an increase in vacancy ratios [adverts per jobseeker] over the last 12 months,” said Kennedy. “Industries such as accommodation and food and arts and entertainment, which previously relied less on bonus payments, are now making greater use of them.” However, Jon Boys, a labour market economist at the Chartered Institute of Personnel and Development, said that base wages were also rising. The HR body has been conducting a survey of hiring and pay for the past decade. At the start

Tech recruiter Sophie Thompson was given a 10 per cent raise in April

C

onfetti spewed out of the envelope as Sophie Thomp- son opened it. The message inside was even more sur- prising: she was to receive a 10 per cent pay rise. She wasn’t alone: her 50 colleagues at the specialist tech recruitment firm For- syth Barnes got similar news at the same time. “We were just really shocked,” said Thompson, 25. Scott Parsons, managing partner at the six-year-old business, said he had been looking at inflation data and feared the impact this could have on his 50 staff in London, Nottingham and New York. “We want people to bring their best selves to work, as well as when they go home in the evening [knowing] they’ve not got money worries,” said Parsons, 34. Thompson, marketing co-ordinator at the headhunter, said her friends were delighted — and envious. When she posted the news on her LinkedIn page last month, she received 22,000 likes (she is usually happy with 30) and 1.7 million hits. “I don’t know anyone who has [had a rise], so when I made the announcement they were thrilled for me. But their immediate response was also, ‘I hope my employer does the same.’” Britain certainly needs a wages boost to combat the cost-of-living crisis sparked by inflation hitting 9 per cent in April, the highest the consumer prices index has reached in 40 years. But Andrew Bailey, governor of the Bank of England, would rather the nation showed restraint. He is under fire for failing to keep inflation at the Bank’s 2 per cent target rate and has warned that prices will be rising by more than 10 per cent by the end of the year. In April, the jump in the average electricity and gas bill was a staggering 53 and 95 per cent respectively, putting enormous pressure on household expenses. Yet Bailey is concerned that fast rises in pay could create an inflationary spiral, because if Britons had higher wages, they could in theory chase higher prices. Bai- ley said last week: “I do think people, particularly people who are on higher earn- ings, should think and reflect on asking for high wage increases.” For now, pay is not keeping up with prices. Data last week from the Office for National Statistics showed that in the

JILL TREANOR

three months between January and March, average wages rose by 4.2 per cent compared to the same quarter last year. In real terms — taking account of inflation — that implied pay actually fell by 1.2 per cent. But the picture is confusing. Demand for workers is outstripping supply: for the first time on record there are more job openings than people unemployed, with the jobless rate down to 3.7 per cent and 1.3 million vacancies in the three months between February and April. Surely, with soaring demand for staff, it should be easy to get a pay rise that at least keeps pace with the cost of living? According to Tony Wilson, director at the Institute for Employment Studies, people are indeed enjoying higher pay — but not through wage rises. Many employers are topping up pay through bonuses, which now make up 22 per cent of private sector pay, compared with 16 per cent a year ago. “The use of golden handcuffs to try and retain people is hap- pening across industries,” said Wilson. When bonuses are taken into account, average pay rose nearly 10 per cent in March compared with a year earlier — the highest since comparable records began, said Wilson. While the data might be dis- torted by some people being on furlough a year ago, Wilson explained that rolling averages still showed a big rise. Some sug- gest there may also have been rush to push through bonuses before the national insurance rises in April. In the financial services sector — where bonuses are common and often paid in March — they made up 34 per cent of total pay. But it was also a similar story in man- ufacturing, where bonuses made up 16 per cent of pay against 12 per cent a year ago; in hospitality and retail, where the share was 14 per cent, up from 10 per cent; and in construction, where they accounted for 12 per cent of the total, up from 7 per cent. “Pre-pandemic, bonus payments constituted 6 to 7 per cent of total pay on average and were mainly a feature of remuneration in financial services,” said Cathal Kennedy, an economist at Royal Bank of Canada. One employer offering bonuses is Brit- ish Airways, which is making efforts to hold on to existing staff as well as entice new joiners. After cutting 10,000 workers during the pandemic, the airline, owned by FTSE 100 giant IAG, offered a one-off bonus to 20,000 staff: 5 per cent for pilots and 10 per cent for operational staff. BA is also offering a £1,000 “golden hello” to sign up cabin crew. With the flag carrier under fire for cancelling swathes of flights due to a lack of workers, it is per- haps no surprise to find it resorting to cold, hard cash to fix the problem. It is not alone. Last week, Marie Claire publisher Future told 3,000 staff below executive level that it would pay their bonuses early in response to the cost-of- living crisis — and that came after a 4 per cent pay rise at the start of the year. “We’ve made a decision on the back of our strong results to make an interim bonus payment this month rather than wait until the end of the year,” said Future’s boss Zillah Byng-Thorne, herself one of the highest-paid executives of a listed company, earning nearly £9 million last year. In Yorkshire, Tommy Banks, who runs Michelin-starred restaurant The Black Swan, has been paying £2,000 bonuses

by the public sector, where the rise was a meagre 1.6 per cent. Mike Clancy, general secretary of the Prospect union, which has members in the private and the public sector, warned that people working in the first of these could be attractive to employers in the private sector. “The public sector will lose out,” said Clancy. That would pose yet another headache for Rishi Sunak, who will have to add calls for public sector pay rises to the list of demands on the nation’s finances. The prospect of defections to the private sector highlights the main route by which workers can secure a pay rise: leaving one job to go to another. Job mov- ers reached a record high of 994,000 in the January-March period as people resigned from their roles. But it also suggests that workers who do not join in the “great resignation” might be missing out. Andrew Goodwin at forecasting firm Oxford Economics said: “That wage growth can’t keep pace with inflation, even with the labour market apparently so tight, does seem to confirm that most workers have little bargaining power.” That might be the case in many instan- ces, but for some workers — such as Thompson at Forsyth Barnes — it has been possible to get a wage rise without jumping ship. Amy Corbin, 33, who runs four Kudu Collective restaurants in south London, raised wages for her 28 staff by 20 per cent at the start of the year. “Big companies are offering huge salaries for staff as there is such a shortage, so people were job-hopping, chasing the money,” she said. “We had to increase [the wages of ] everyone who was already in the company so they were in line with the new people we were bringing in.” A laudable move from an employer trying to retain her people — but one that, if repeated up and down the country, will give Andrew Bailey sleepless nights.

BREAK TIME OVER?

When Sam Winward found out that his employer was offering unlimited time off, he felt ecstatic, Laith Al-Khalaf writes. “I remember telling all my friends, who had 25 days off, and thinking it was phenomenal.” But when the 27-year-old arrived in Palmera for his Spanish summer holiday last year, his elation dried up in the Valencian sunshine. “You go away and end up feeling guilty,” he said. His guilt trip may prove a cautionary tale for companies making similar promises. Last week, Goldman Sachs abolished holiday limits for senior managers. Data from recruitment website Indeed shows that last month 1,288 per million job advertisements were offering unlimited holidays — a 22 per cent increase on April 2021. But some firms are finding this counterproductive. Last week, Winward’s employer, recruitment agency Unknown, scrapped its limitless holiday scheme. “It really did the reverse of what we wanted it to do,” said Ollie Scott, chief executive. “There is a general anxiety, particularly among high performers, around taking holiday.” The policy can also result in disparate workloads as people cover for colleagues. “That... can breed a culture of resentment,“ said Ben Gateley, chief executive of software design company Charlie HR, which has also ditched unlimited holidays. However, Dominic McGregor of marketing agency Social Chain is still a fan of the idea, because it stopped his staff from using leave for medical appointments. “It led them to take holiday for actually going away and recharging,” he said. Richard Fox, senior employment consultant at law firm Kingsley Napley, doubted that staff would be tempted to abuse unlimited holiday perks. “I think the prospect of an employee taking a real liberty in that way is not great.”

Firms are finding the cash to

bag new workers and retain existing

ones, but can the wages surge last?

Bonuses are

back as Britain

cries out for a...

pay

rise

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