Has salary inflation peaked?
Official figures show wage inflation still climbing up to August this year. Our data suggests this will start to reverse in the coming months.
The latest official figures on salary inflation suggest wages are still growing – the most recent ONS figures recorded regular pay growth at 7.8% between April and June 2023, compared to the same period the year before. This is the highest pay growth ever recorded by the ONS.
But, our research suggests that salary inflation – at least in our four sectors of IT, HR, finance and marketing – has already peaked, and that subsequent ONS releases are likely to start to reflect that in the coming months.
The ONS figures determine wage inflation by comparing wage growth within a three-month period compared to the same period 12 months previously. There is also a short time lag - the figures released in August showed wage growth between April and June 2023.
This is also reflected in our Salary Survey data, gathered in June 2023. Our survey found average salary growth of 7% across our sectors, with very few employers intending to give larger pay increases. This is compared to an average of 9% in 2022.
Even for roles in high demand, such as software developers, salary inflation appears to have halved this year compared to last year. According to our salary survey, specialist software developers could expect raises of around 15% in 2022. In 2023 this has halved to around 7%.
In addition, few businesses are adding to pay packages with bonuses. In 2022, just over half - 52% - of the businesses we surveyed said they offered cost-of-living-related bonuses; in 2023 this has fallen to just 5%.
As a result, we expect that salary growth in 2023 has slowed significantly. As we reach the later months of 2023, we would expect the ONS figures to start reflecting this.
However, as the job market starts to pick up again in 2024, and once hiring demand starts to rise, we will see businesses responding and salary growth rising once again.
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