Wage Growth Surpasses Inflation: Insights from Industry Leaders

A recent analysis reveals that salary increases significantly outpace inflation across various sectors in Britain, based on payroll data from 90,000 companies.

Small and medium-sized enterprises reported an average wage increase of 8.2% in the year leading up to September, far higher than the consumer price inflation rate of 2.2% recorded in August.

This increase brings the average hourly wage to £17, amounting to approximately £35,360 on an annual basis, according to findings from Employment Hero, a human resources technology firm.

The construction industry saw the most significant wage growth, with salaries climbing by 18.9% over the past year.

Sam Stageman, co-owner of Pentalec, an electrical engineering firm in Kent, noted that the results came as no surprise. «The job market has remained strong since the pandemic, leading to a shortage of skilled professionals. Talented individuals are being actively recruited and offered higher salaries,» said Stageman, aged 39.

Pentalec recorded revenues of £9.3 million last year and was listed in this year’s Sunday Times 100, highlighting the fastest-growing private companies in Britain.

Stageman shared that he is currently seeking to fill several positions, including one for an estimator, whose salary demands are exceeding current budget limits. «There’s a promising candidate asking for £10,000 more than what I pay my estimator team manager. High-demand roles command competitive salaries,» he explained.

He mentioned hearing anecdotes of surveyors earning six-figure salaries, with some claiming up to £120,000 annually, adding that Pentalec cannot compete with such figures.

Stageman also commented on the rates for contractors, stating, «Skilled tradespeople, such as plumbers and electricians, are now charging around £350 a day. That’s an astonishing amount.»

He explained that rising project costs must account for increased wages, making it essential to incorporate this from the project’s inception. «You cannot simply escalate wages by 18% without adjusting pricing. There is minimal margin for flexibility,» he said.

Byron Dixon, founder of Leicester-based Micro-Fresh, which produces antibacterial treatments for various products, reported a 12.5% rise in wages for his ten office staff over the past year, which covers several administrative and operational roles.

Dixon attributes the wage increases to a tight labor market and the need to retain employees. «With fewer candidates available, keeping good staff happy is crucial. The ongoing cost of living crisis continues to strain working families. Many people are still struggling financially,» he noted. «Is the crisis behind us? Absolutely not. Only a select few can afford to live without concerns.»”

He shared that wage increases were implemented over the summer, anticipating the financial challenges of autumn and winter. «We didn’t want our staff to come to us seeking help with heating bills during the colder months,» he remarked.

For Micro-Fresh, which achieved UK sales of around £1 million last year, Dixon stated that raising prices is not feasible. «We are selling more instead, and investing significantly in international markets. I have upcoming trips planned to the US, Dubai, and Denmark in the next few weeks,» he mentioned.

Dixon considers his company fortunate to expand into new markets, which allows for better pricing opportunities, while also entering new sectors. The firm recently launched Home-Fresh, a product designed to prevent mold growth in construction settings.

«We have successfully increased our revenue, but I recognize that many other business owners are encountering significant challenges. Transitioning production from automotive to aviation parts isn’t a simple task,» he added.

The research from Employment Hero coincides with government assurances to maintain the national living wage, aimed at protecting workers from erosion of real earnings. Last month, the Low Pay Commission suggested that the adult minimum wage may rise from the current £11.44 per hour to as much as £12.39, representing an increase of 8.3%.

The government is also unveiling proposed legislation to enhance workers’ rights, including the ability to file unfair dismissal claims from the first day of employment.

Concerns exist among businesses that such measures might deter hiring, potentially leading to stagnated growth.

The government plans to seek feedback on these proposals, which may introduce a statutory probation period for new employees. They are considering a nine-month timeframe, with any changes not expected to take effect until at least autumn 2026.

Dixon cautioned that these changes could lead to unforeseen consequences, particularly for individuals from disadvantaged backgrounds. «People from privileged backgrounds may be seen as lower-risk candidates by employers, while those with less affluent histories, like myself, could find barriers to employment heightening due to increased employer hesitancy,» he stated.

«My own experience demonstrates the need for opportunities. If potential candidates face increased obstacles to risk-taking from employers, we might see a decrease in chances for talented individuals from various walks of life,» he concluded.