'Unsustainable' wage growth to cool this year amid rising inflationary pressure

2022 saw a second consecutive year of significant salary growth following an increase in cost-of-living pressures and competition for staff amid growing shortages

As inflationary pressure continues to force upward pressure on salaries, Irish employers will be more cautious this year with 2023 expected to mark the end of large-scale wage growth.

An analysis by Morgan McKinley anticipates pay rises this year of just 5% across a range of sectors, marking the end of "skyrocketing" wages that analysts say have become "unsustainable."

"Businesses now seem to be rebalancing," said Global FDI Director of Morgan McKinley, Trayc Keevans.

"In order to maintain profitability in a highly inflationary environment, businesses need to keep their costs down and a key way of doing this is by limiting salary increases."

Exceptions will be made in more niche and high-demand sectors where salaries could still increase by up to 15%.

Findings from Ireland reveal that 53% of employees are considering looking for a new job in the first half of 2023, with the same percentage of employers expecting to lose staff due to higher earning potential elsewhere.

As real wages continue to decrease, 68% of employers expect salaries in their specific sector will rise in 2023, with 57% of employees anticipating a salary increase before the end of the year.

2022 saw a second consecutive year of significant salary growth following an increase in cost-of-living pressures and competition for staff amid growing shortages, with 71% of employers increasing salaries in an effort to retain staff.

This increased pressure saw 60% of Irish professionals receive a pay rise last year, with just under 20% of those offered sizeable rises in excess of 15%.

"Despite over half of professionals expecting a salary increase in 2023, it is unlikely that we’ll see the widespread wage growth we have become accustomed to over the past two years," Ms Keevans continued.

"The cost-of-living crisis will increasingly impact employee turnover as people will look for higher-paying jobs to try and offset the higher costs they’re faced with.

“Employers need to be mindful of these factors and ensure that what they are offering is aligned to employee expectations, encompassing both salaries and benefits. 

"This is even more crucial considering the skills shortage that remains across many industries. Top talent will always be in demand, and 2023 will be no different in that regard."