Large employers respond to the cost of living crisis - PwC survey

• 83% of reward specialists at large companies are taking action or considering ways to help employees

• Half are implementing or considering additional pay increases

• 40% are providing one off bonuses 

• 15% are making non-financial interventions, such as help with travel, home insulation and shopping.

More than eight in ten employers from large UK businesses¹ are taking action to help staff in the face of the cost of living crisis, according to a new PwC survey². Financial support through focussed pay increases for essential workers (53%), additional pay reviews (51%) and one off bonuses (40%) are the top ways large businesses are intervening to help with rising inflation. This comes as the latest analysis from the ONS shows real regular pay has dropped by 3%³ and inflation as measured by the Consumer Price Index has moved into double digits⁴, with further increases expected. 

While direct financial support is the primary way in which employers are helping their workers, some organisations (15%) are implementing other non-monetary interventions such as increased staff shopping discounts, support with home insulation, financial wellbeing programmes and employee hardship funds. 

The majority of employers surveyed (82%) report increases of 1.5% to 4.5% to their pay budgets in early 2022, up slightly from prior years where a range of 2% to 3% had been the norm. Only 18% had a budget for pay increases of over 4.5% for 2022. Most companies conducted their pay budget reviews earlier in 2022, before the record high inflation. Very few organisations have decided on pay budgets for 2023.

Although large employers have been focussed on helping staff, they are also grappling with talent shortages, with 93% of those surveyed saying they are at least somewhat concerned about their current attrition rates. Indeed, many are looking at how to use financial reward to deal with talent scarcity and attrition alongside immediate responses to cost of living challenges. Responses include using retention awards (46%), sign-on bonuses (24%) and changing pay bands (22%). More than half (62%) are introducing greater flexibility in ways of working and hourly patterns, including remote working policies (44%).

Alastair Woods, pay and employment partner at PwC UK, commented:

“The interventions, financial or otherwise, being made by the majority of large UK employers will be some relief to workers but, while large organisations are able to step in and offer salary uplifts, this won’t be the same across the board. Employees who can vote with their feet and move to a better paying job will do so, but many others will face a historic crunch on their finances.

“We are seeing the conflation of two major employment issues - the rising cost of living and skills shortages. Almost one in five UK workers say they are going to quit their job in the next 12 months⁵ so it is no surprise that talent retention is a top priority for employers. In the current economic climate, employers need to consider how to target spending to have the most impact on workers. A more flexible and innovative approach to reward and working conditions will be critical, but so will programmes that hold onto talent for the long haul. Organisations are investing in programmes focused on wellbeing, flexible working patterns, career ladders, and new and more personalised benefits.

“We are some way off the peak of inflation and organisations will need to have a lot of tools at their disposal to weather this in the months ahead, while trying to manage costs as the economy slows. Despite the difficult economic conditions, we expect organisations to continue to find ways to support staff and, where sustainable and affordable, agree pay budgets for 2023 at a level not seen for decades.”

Other key findings from the survey include:

• Employers report that the main challenges to attracting new talent are a lack of external supply (85%) and the time it takes to recruit (47%)

• Over half (56%) of respondents are retraining and upskilling their current employees to fill key skills gaps

• Around a quarter (26%) are sourcing international talent, or looking to access or share talent with other institutions (25%)

• 13% are making greater use of contractors or gig workers

• Over 79% of respondents are looking at ways to reduce workforce costs and 97% are aiming to improve productivity

• 53% are investing in new technologies, 41% are considering increased automation, and just over a third (35%) are thinking about their location strategy within and outside of the UK.

Ends

Notes to the editor

¹ We define “large employer”, “large company” and “large businesses” as one with over 250 employees. All respondents to the survey manage reward at companies with over 250 employees. 

² PwC surveyed 98 heads of reward and reward specialists from 84 large businesses in June 2022 about how their organisation is responding to the cost of living crisis and talent shortages. The respondents are reward specialists at some of the UK’s largest firms across the financial services, retail, consumer, travel & leisure and technology sectors. 

Combined, the respondents oversee the reward of over 1,000,000 employees in the UK, overseeing an average workforce size of just over 16,000 (overall figures on total number of employees have been calculated on a redistributed base of the total survey respondents to exclude unknowns):

• 18% of respondents work at companies with UK workforces of 1,000 or less

• 73% with 1,000 - 50,000 employees

• almost 10% with UK workforces of over 50,000 

54% of the 84 large businesses represented in the survey are listed on the London Stock Exchange, of this, 60% are FTSE 100 businesses and 22% are FTSE 250 businesses. 

³ Average weekly earnings in Great Britain: August 2022, Office for National Statistics

⁴ Consumer price inflation, UK: July 2022, Office for National Statistics

⁵ 2,086 people who work or are active in the UK labour market were surveyed in March 2022 as part of PwC’s global Workforce Hopes and Fears Survey. A key finding in the survey is that almost one in five UK workers (18%) say they are very or extremely likely to change jobs in the next 12 months. You can find the UK press release here and UK findings here. 

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