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Employment

How much should my pay rise to beat inflation?

With latest figures showing inflation far outpacing pay across the economy, it might be time to ask for a (higher) raise.

Inflation is pushing up the prices of food and fuel to, for some, impossible levels. For many, the only option to avoid falling into in-work poverty is to seek a pay rise to cushion the blow. 

Three in four workers in the UK are considering changing jobs due to the cost of living crisis, and the widespread labour shortages in sectors ranging from health to hospitality, make now a good time to take advantage of those record unfilled vacancies

YouGov polling found that of the 40 per cent of people who asked for a pay rise, just over a quarter succeeded. However, just one in five women who ask for a pay rise are given one, compared with just under a third of men – just one of the factors contributing to the gender pay gap

We asked a career expert with over 12 years experience signing off on pay rises at a leading UK bank how to ask for the pay rise you need. 

What is the inflation rate and how does it affect pay?

Inflation eased slightly for the second month in a row to 10.5 per cent, in December, down from 10.7 in November. the Office for National Statistics said. This is a fall from the 41-year high recorded in October, when it reached a staggering 11.1 per cent. 

In case you can’t remember what “normal times” looked like, CPI inflation has rarely topped 3 per cent in the last decade. 

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Prime minister Rishi Sunak recently promised to halve the rate of inflation this year, though critics were quick to point out that the Office for Budget Responsibility was already predicting inflation will fall to 3.8 per cent by the end of 2023.

The minor easing in late 2022 was driven by falling fuel price inflation, but concerningly the cost of food accelerated, according to economists at the Resolution Foundation. 

“Inflation looks to have peaked last October as it continued to ease at the end of last year. The speed at which inflation falls in 2023 will help to determine the duration of the cost of living crisis,” said Jack Leslie, economist at the think tank.

However this easing will have little impact on the poorest families, who are experiencing an even higher inflation rate than average.“Inflation remains particularly high for low-income families who are on the wrong side of a large cost of living gap due to the high cost of energy bills and food,” Leslie continued.

The inflation rate is a measure of how prices change over time. If you’ve been noticing that the cost of a bunch of bananas or a pack of loo-roll has increased, that’s because of inflation. The inflation rate is a measure of how much, and how quickly, these prices are rising. 

Rising inflation means the value, or spending power, of pay packets is decreasing. A pound today only buys 89.5 per cent of what it could buy this time last year.

Who got a pay rise in 2022 and 2023?

Latest official figures show that average monthly pay (excluding bonuses) across the economy increased by 6.4 per cent in the three months to November this year, according to the Office for National Statistics

This is the strongest ever growth in pay (outside the pandemic period), however when adjusted for inflation, it also means that real-terms pay fell at the fastest rate for 20 years. What’s more, this record-breaking rise is not being felt equally across British society, with the gap between how much people are paid in businesses and in public sector work such as healthcare and education at its highest ever.

However, this record-breaking rise is not being felt equally across British society, with the gap between how much people are paid in businesses and in public sector work such as healthcare and education at its highest ever.

Wages in the public sector – that’s largely teachers, NHS workers, civil servants – grew by just 2.7 per cent in the year to October, whereas those in the private sector had their pay boosted, on average, by 6.9 per cent. 

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Since September, basic pay for newly qualified nurses increased by 5.5 per cent, but most nurses received a rise of around 3.7 per cent. This is up from the government’s previous offer of a 3 per cent raise, but far much below the 5 per cent above inflation the Royal College of Nursing asked for. 

New teachers are being paid 8.9 per cent more in a bid to entice people to join the profession, while experienced teachers got a  5 per cent pay rise.

The majority of doctors and dentists received a 4.5 per cent pay rise, while the lowest paid NHS staff including porters and cleaners got a 9.3 per cent increase. 

All prison staff have been awarded a pay rise of at least 4 per cent, and police officers awarded a 5 per cent overall pay rise, which works out to a £1,900 salary uplift, or an extra £36 per week.

This is why many unions representing workers across the public sector are threatening strike action unless their members receive a higher pay rise. 

Union the RMT says its members working for National Rail and Transport for London haven’t received any pay rise for two or three years, leading to railway workers going on strike.

How much of a pay rise should you ask for? 

Any yearly pay rise at or below the current rate of inflation is, in real money terms, a pay cut. So you might wish to request a percentage rise to match inflation, and an additional amount to reward your achievements. 

For every £100 you earned last year, you would have to earn £109 this year for your money to have the same value, according to the Office for National Statistics’ own calculations. You can use this calculator to find out how much of a pay rise you should ask for if you think it should rise to match inflation.

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However, while it might be tempting to justify your request for a pay rise on the increasing cost of living and inflation, career coach Samantha Lubanzu suggests steering away from this to focus on your individual value. 

Lubanzu, who has 12 years experience working as a HR Business Partner at Barclays Bank, explained that sadly, rising inflation is something that everyone is facing, so should not be the basis for your request. 

“Most organisations will be having their HR team working on how they can bring their pay up in terms of inflation rises,” she said. This has traditionally been at a rate of 3 per cent, though this is well below current inflation rates. 

When calculating the rise you want, she recommends looking at what competitor organisations are paying, alongside inflation, the cost-of-living, and what you need to live the lifestyle you want. Make your request in terms of a percentage rather than an amount of money, she adds, as this is the language the finance or HR team will use. 

How to ask your boss for a pay rise?

When it comes to having the conversation, Lubanzu suggests sending your line manager a short email requesting a one to one meeting to include a salary conversation. It’s best to do this face-to-face, or at least over video call. 

“The main thing is to focus on what you’re personally bringing to the role,” says  Lubanzu, who suggests asking yourself: What do you bring to the role? How can you demonstrate that you’ve been consistently performing highly? And what can you, and only you, do for the organisation?

“You need to focus on your individual contribution to the organisation and how that differentiates you to competitors outside the organisation, so the reasons why they don’t want to lose you,” she continued.

​​To prepare, you could write a script and practice by recording yourself on your phone and listening to it back.

What to do if your request for a pay rise is denied

If the answer is no, your number one reaction should be to ask for a detailed justification for the decision, and ask what would make it a yes in future, says Lubanzu. 

Stay positive, thank them for their consideration, and put in place steps you can take to go back in a few months time with an even stronger case. 

It is important to remember, too, that other company benefits can offer value to your working life beyond income. Lubanzu recommends thinking about what other benefits the company could offer you that they might be more willing to concede on. 

“It’s really important to understand that money is never really the main driver for individuals to stay in an organisation, there are so many other benefits they need to look at,” she says. 

The need for a comprehensive sick pay policy has been drastically highlighted over the pandemic, with statutory sick pay (the minimum amount set by the government that employers must pay), woefully inadequate for anyone to live on. 

While your company may deny a pay rise, they may concede to increasing your holiday allowance or improving sick pay policy, or introducing policies to support employees going through the menopause, experiencing bereavement or juggling care commitments. 

Allowing flexible working, funding a qualification or allowing a sabbatical, are other ways to boost staff wellbeing that might make staff more eager to stay. 

And if a pay rise isn’t possible, a cut to working hours in the form of a four day working week, could be a compromise. 

The Big Issue’s #BigFutures campaign is calling for investment in decent and affordable housing, ending the low wage economy, and millions of green jobs. The last 10 years of austerity and cuts to public services have failed to deliver better living standards for people in this country. Sign the open letter and demand a better future.

Career tips and advice from our Jobs and Training series:

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