Expected pay rise budgets have been pushed to 4% for UK organisations, according to research by Willis Towers Watson (WTW).
Its ralary budget planning Report found that 64% of organisations have budgeted for higher employee pay rises than last year in response to rising inflation; 41% have increased their budgets since their original 2022 projections, and 45% have opted to stick with what they agreed at the start of the year.
Total compensation budgets covering pay, benefits, discretionary bonuses and payments have risen by 7.3%, with 68% of employers increasing workplace flexibility, 58% creating a broader emphasis on inclusion and diversity, and 44% offering incentives such as sign on bonuses.
A total of 34% of organisations have planned to raise starting salaries and change health and wellbeing benefits, while 48% said they will increase remote working options and improve the employee experience.
Meanwhile, 55% have taken measures to retain current talent through broadening their focus on diversity, equity and inclusion. Almost two-fifths (38%) said changing compensation programmes will impact this, and 37% planned on changing health and wellbeing benefits specifically in order to achieve this goal.
In addition, 13% have taken action around the frequency of salary increase adjustments, while 23% planned on increasing how often they offer salary rises to staff in the future.
Paul Richards, reward data intelligence leader for Europe at WTW, said: “Employers are using a combination of tactics to support employees in the wake of rapidly rising inflation. While salary increases are currently being outpaced by inflation rates, employers are looking to other avenues such as increased benefit offerings, higher bonuses and more one-off payments.
“2022 has seen growing financial pressures across the board, but inflation is forecasted to drop to 3.6% in 2023, while average pay rise budgets are projected to stay at 4%, which should help to close the gap on rising costs.”