UK private sector pay predicted to increase by 2.4% in 2021

Private sector pay expected to increase by 2.4% in 2021

UK employees in the private sector are set to receive an average pay rise of 2.4% in 2021, according to research by Willis Towers Watson.

Its Salary budget planning report, which surveyed 18,000 employers across 130 countries, found that the Covid-19 (Coronavirus) pandemic has forced organisations to revise plans for pay increases in 2020, leading to average pay increases of 2.2%.

A-third (33%) of private sector employers have frozen pay increases in 2020. However, this is expected to fall to just over 3% of organisations in 2021.

In the UK, the leisure and hospitality industry is predicted to offer an average wage increase of 1.4% in 2021 while the automotive industry is expected to offer a 1.9% average wage increase, followed by the construction, property, and engineering industry, offering 1.8% increases.

At the other end of the scale, employers in the insurance and retail industries are predicted to offer a 2.9% average wage increase, followed by organisations in the fintech, and business and technical consulting industries which are predicted to offerrises of 2.8%.

Across Western Europe, the largest pay increases are expected in the Netherlands (2.5%), Germany (2.4%), Italy (2.1%), and France and Spain (2%).

Keith Coull, senior director, global data services at Willis Towers Watson, said: “After a difficult year for employers and employees, battling lockdowns, employee safety issues, working from home and declining revenues, many employers are finding ways to handle the crisis better, manage their businesses and help their employees with a more focused work and reward strategy.

“Many organisations are looking ahead to 2021 with cautious optimism, which is reflected in slightly higher pay rise budgets than we saw this year.

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“Not all industries have been impacted in the same way. While many technology and banking firms have been successful due to their ability to aid digital acceleration and financial liquidity, [organisations] in the hospitality, leisure and airline industries have suffered. The differences in how organisations were impacted by the pandemic are likely to be heavily reflected in pay rise levels too.”

“We are also expecting many [employers] to be differentiating their allocation of pay rises so that they can provide meaningful salary increases to their best and most valuable talent and prioritise spending on jobs that are likely to contribute the most to success or survival next year.”