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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

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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?

The inflation rate jumped to 11.1 per cent in October, according to new figures from the Office for National Statistics. This sets a new 41-year record, and demonstrates that there is not the easing many had hoped when the rate dipped slightly to 9.9 per cent in August.

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Economists have blamed previous rises on the highest food price increases in decades, with the cost of food at a multi-decade high.

“This new peak is being driven by surging energy prices, despite the government’s Energy Price Guarantee,” said Jamie O’Halloran, economist at Pro Bono Economics.

“The latest ONS data shows nearly half (47 per cent) of households are finding it difficult to meet their energy bills and this challenge is only going to worsen as winter takes hold.”

In October, households were paying  90 per cent  more for gas, electricity and other fuels than they were a year earlier, while food price inflation has risen to the  highest level since 1977 – from 14.6 to 16.4 per cent.

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 88.9 per cent of what it could buy this time last year.

Who is getting a pay rise this year?

Latest official figures show that average monthly pay (excluding bonuses) across the economy increased by 5.7 per cent in July to September 2022, according to the Office for National Statistics. This is the strongest ever growth in pay (outside the pandemic period), with employers looking to support employees with pay rises as inflation hammers their pay packets.

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.

While average pay in the private sector grew by a record-breaking 6.6 per cent in the three months to September, those in the public sector have seen their pay packets increase by just 2.2 per cent on average.

Pay in the public sector is set, some might say restricted, by the government, which set its annual pay award in September. Healthcare unions are urging the government to stump up the cash to raise the pay of NHS workers in the upcoming Autumn Budget, with reports that chancellor Jeremy Hunt might raise public sector pay by 2 per cent.

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.

There is a widening gap between pay rises in the public and private sector. The private sector saw pay rises of 5.9 per cent in the three months to June 2022, while those working in the public sector on average received a rise of 1.8 per cent. 

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 across the country coordinating the biggest strike in 30 years.

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.

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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. 

Career tips and advice from our Jobs and Training series:

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