Press release:

Employers and employees face a 'great cost squeeze' as government support fails to lift sufficient pressure say managers

Tuesday 19 April 2022

 

  • Only half of firms offering basic pay awards in 2022 and only 1 in 5 businesses planning measures to help support staff as prices rise
  • Managers worried about their firms’ ability to absorb rising costs as inflation hits 7%
  • Over 4 in 5 managers don’t think Government have gone far enough to help UK business with the increasing costs
  • Institute has identified 4 key actions to help employers weather the economic storm

19th April 2022: Britain’s workers seeking pay rises and extra help from their organisations are often coming away empty handed, research by the Chartered Management Institute has shown. Whilst half of companies are providing basic pay awards, 48% reported that no raises are being offered or that they were unaware of plans to do so. The research   also showed that 1 in 3 private sector managers is concerned about the financial strength of their organisation.

CMI’s findings come as inflation hit a 30 year high of 7% in March. Managers report that basic pay awards however are reported to be on average only 2.8%, leaving pay awards significantly lagging behind inflation. Of those increases, pay awards in the private sector are higher than public sector, at 3.2% and 2.4% respectively.

The research also showed that a third of managers have seen an increase in requests from their direct reports for pay raises, above basic pay awards. A third of managers themselves are thinking about requesting a pay rise, above basic pay awards,  to meet the rising costs of living.

Yet whilst many employees are turning their thoughts to pay talks, very few organisations (1 in 5) are actually planning action to support staff as a direct result of the cost of living crisis (with, for example, cycle to work schemes, eye care vouchers, employee assistance programmes and free tea, coffee and cold drinks).

A third of private sector managers polled were concerned about the financial strength of their organisation. Meanwhile 57% of all managers say their organisation hasn't taken any actions or didn’t know if there were plans to cope with rising business costs. Where respondents did know, measures such as contract negotiations, budget reductions and streamlining expenditure were cited.

Anthony Painter, Director of Policy at CMI commented; “Cost pressures are hitting employers and employees alike, and something in the system will have to give.  There is a great cost squeeze with employees under financial pressure. Businesses also face the squeeze as they face a potential downtick in wider consumer confidence, and higher prices for materials, supply chain issues and higher production costs.  Add to this that we’ve not really seen the full effects of the Ukraine conflict filter through yet, and it’s clear that pressure is mounting across the board and there are undoubtedly some rocky times ahead.

4 out of 5 managers polled didn’t think the Spring Statement went far enough with measures to help UK business, their organisation, or to support British workers through the costs of living increases. We are seeing people worried more now about their income than about catching Covid - quite a change given where we were only a year ago”.

CMI is advising businesses and organisations to:

  • Provide strong support for staff
    Where possible, support on pay is recommended as staff face rising costs in day to day living. Existing employee benefits may help staff financially (such as season ticket loans etc). Employers should adapt wellbeing support offered during the pandemic for new challenges around finances, as well as financial capacity training alongside.
  • Up contingency planning and be agile, to ensure business resilience
    Managers and leaders need to be ready to plan for these possible disruptions to their businesses into 2023 and beyond. We saw plans developed during the pandemic - managers and leaders in the UK need to respond with similar agility now.
  • Invest in upskilling their existing staff to ensure innovation in a time of economic uncertainty
    Managers need the right skills to face the coming set of challenges, such as how to support staff and planning for uncertainty. More highly skilled workforces can support productivity, efficiency and innovation. This in turn can ensure cost savings for a business.
  • Future proof businesses against ongoing economic shocks
    Leaders and managers must find ways to safeguard against significant economic downturn, and build sustainable, resilient businesses that can weather global economic shocks. Supply chain analysis, Net Zero targets and business value should all be reviewed.

Anthony Painter concluded; “The recent Spring Statement offered the Government an ideal opportunity to shoulder more of the weight and we are now seeing pressure mounting on employees and employers alike.

“Managers should be prepared to be proactive in listening to staff and pointing to employee support to help staff through the crisis. Employers will need to think very carefully about providing additional compensation- caught between business costs on one hand but pressures on employee well-being on the other with potential knock on impacts on organisational performance.

“Pressures are likely to mount over coming months unless there is action taken to relieve pressure. Government will need to act by autumn at the latest.

- Ends -


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Notes to editors

Notes to Editors

CMI surveyed over 1,000 UK based respondents between 31st March and 5th April 2022.

For the purpose of this survey, a basic pay award is a pay award for all staff to reflect the cost of living.