Inflation & Wages: What To Expect

2022 is turning out to be a uniquely challenging year for workers and employers in post-COVID and post-Brexit Britain. In April, employers are set to raise wages in line with national minimum wage increases. Considering the context in which these rises are coming into force, these changes are timely and vitally important. Having a macro-view on the employment and pricing index market is vital for employers who are building both wage structures and working cultures that can support workers in the long term.


What are the wage changes coming into effect in April 2022?

The increase to National Living Wage (NLW) and National Minimum Wage (NMW) rates in April 2022 will be:

  • NLM – £9.50ph, rising from £8.91ph (6.6% rise)
  • 21-22 Year-Olds – £9.18ph, rising from £8.36ph (9.8% rise)
  • 18-20 Year-Olds – £6.83ph, rising from £6.56 (4.1% rise)
  • 16-17 Year-Olds – £4.81, rising from £4.62 (4.1% rise)
  • Apprentice Rate – £4.81, rising from £4.30 (11.9% rise)


These rises were made in consultation with the Low Pay Commission – an independent public body that advises the Government each year on the rates of the National Minimum Wage. You can read their most recent report, which impacted the changes above, here.


What are the upcoming inflationary pressures on UK workers?

The cost of living is increasing at a rate not seen in a generation. The effects – compounded by both economic and cultural recovery post-COVID, the ongoing effects of Brexit, and the mindsets and attitudes to the Great Resignation – are placing an enormous burden on employers.

However, there are ways in which you can continue to build healthy and supportive recruitment and retention strategies if you know how. Let’s look at the context:


According to the ONS, UK inflation is rising at the “highest rate in 30 years”

  • The Consumer Prices Index (CPI) rose by 5.5% in the 12 months to January 2022, up from 5.4% to December 2021. This is the highest CPI 12-month inflation rate in the National Statistic series,
  • The headline stats on energy prices (and the rising of the energy price cap by 50% as a result) are also bearing on UK ratepayers, with the price of gas for supplies rising 250% since 2021, with costs predicted to hit consumers in April.
  • Other pricing increases – such as the reintroduction of roaming charges, rail prices, food, clothing, petrol, council tax, NI and prescriptions for 60 – 66-year-olds – are set or could potentially be introduced this year.


While there is much to be said for employers doing the “right” thing and raising wages above inflation, this reasoning has to take stock of moral imperatives and attention to financial detail. Throwing money at this situation won’t help, because while wage rises are soaking up the news cycle, it’s not the sole reason why people won’t work with you, or will leave your company.


You need to understand the driving forces behind the great resignation and approach these hiring issues with a complete holistic strategy. It means taking time to do a little soul searching – is raising wages enough to keep hold of staff? If you raise wages, and so do your competitors, what other facets of your staff retention policy is going to keep staff with your enterprise? What are employee expectations in 2022?


How to ride the wave of salary and expectation change

  • Most pay increases ranged between 2% and 3%, below the recent pace of inflation, but went as high as 14% in some cases.


Consider the above quote – are you willing or able to raise wages by 14% if needed? While some companies have the financial heft to do so, many don’t, and considering the vast majority of employment insecurity fell on SMEs over the last two years, bottomless financial coffers are not the way through the financial fog.


Consider revamping your recruitment strategy to take stock of the following:

  • ESG – employees are demanding that their values be reflected in corporate senior governance, community support, ethics and sustainability. Everything from hybrid work schedules to mental health benefits is scrutinised by candidates looking for new employers, and a well crafted, honest and invested in ESG culture is hyper-attractive to workers, especially Gen Z talent
  • Wage rises in context – wages raises need to be structured and fair, especially to your existing employees (new staff getting paid more than old-timers is a non-starter and will create a two-tier workforce). We suggest building better, more relevant reward schemes, employee support benefits and a much more frequent, meaningful performance management structure. Remember, one of the main causes of the great resignation was a gulf in expectation and behaviour between senior management and workers in regards to working culture, support, welfare and pay


In that context, wage rises have meaning. While you may not be raising wages above inflation (and for many that is simply a bridge too far), wider career and welfare support can engage your staff beyond the salary, and create real meaning and connection between you and them.


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