This year, you’ll need a pay rise. With inflation nearing 10%, here’s important info for coffee people and businesses.
Everyday essentials are becoming more expensive. Your electricity and gas bills are going up, food costs are rising and most things you buy (from phones to pizza) costs more too.
Think about it like this. If you bought £100 worth of ‘stuff’ at the start of this year, if you were to buy that same stuff on 31 December – it’s likely to cost you around £110!
This year a pay rise is required for your standard of living to remain the same.
Prices are going up
Over time, prices go up. The reason is inflation.
As inflation affects everything bought and sold, it’s a contentious issue and economists love to debate its causes.
There are different ways to calculate inflation. Mostly it’s done by taking a mixture of things people commonly buy and see how much they increase in price over time.
In coffee, many costs are going up such as green coffee, shipping, gas and electricity.
In the UK, the main measure of inflation is called Consumer Price Inflation (CPI). It includes things such as food, clothing, healthcare, transport and recreational activities. The CPI now measures inflation at 9%.
Inflation is now at a 40 year high
People generally like it when prices don’t change much over time. This means you can budget more accurately and you can be confident buying something when you know the price is about the same yesterday, today or tomorrow.
Most countries like a little inflation. The Government has told the Bank of England to keep inflation at 2%. This means something that costs £1 today will (on average) cost £1.02 a year from now.
As things cost a little bit more each year, an average person needs to earn about 2% more each year just to maintain their lifestyle.
Over the past fives years coffee industry pay has increased faster than the rate of inflation – so most coffee people have been able to buy and do more with their wages.
This year is different because annual inflation will probably peak at over 10%. This the highest rate of inflation over four decades.
Thinking about a pay rises in 2022
Most people working in coffee will be in one of three groups. It is good to understand which group you are in:
- automatic pay rise
- a pay rise process
- individual pay rises
Automatic pay rises
First check, does your coffee company automatically increase pay?
Some companies have a yearly process so everyone’s pay is automatically increased (based on inflation and other factors).
If this is your situation, then you’re lucky as many coffee companies don’t yet have this structure in place. They are either too small or too young to have operated in a higher inflation environment.
Also check whether your pay will automatically rise because it is tied to a benchmark, like the Living Wage or the National Living Wage (which is the minimum wage). These rates of pay are recalculated annually and take inflation into account.
A pay rise process – will there be a special process for 2022?
If your employer doesn’t have an annual review process and your pay isn’t tied to a benchmark, then it’s worth chatting to your boss about how they’ll manage pay rises this year.
It would be forward-looking of them to accept that this is an unusual year and to establish a process that manages everyone’s pay.
It would also be advantageous for them as they can set one process and save time by not having to negotiate each pay increase separately.
Individual pay rises
If they don’t have a process and aren’t willing to introduce one, you’ll need to negotiate your pay increase.
Understand the current inflation rate, review current rates of pay and present the facts – see the box below.
Get paid at the right time
When you get your pay rise also matters.
The current inflation rate is for the last 12 months, so if you haven’t had a pay rise in the last year – you are already 9% worse off.
For a full-time barista on the London living wage the difference is over £1,500. Ouch, that’s a serious reduction in quality of life.
Because the amount of money is not trivial, many employers will want to increase your pay later in the year; and you’ll want it earlier in the year – so you’ll have to negotiate.
Five tips for taking about pay rises 💵
Your employer will expect you to ask for a pay rise this year.
Companies don’t pay people more because their personal expenses have gone up; they grant pay rises because the industry rate of pay for that role has increased. So, make your case based on pay rates (not your personal circumstances).
Your colleagues are equally impacted by inflation. It might be best to talk with your employer as a group so your boss doesn’t have to negotiate everyones’ pay individually
Keep monitoring inflation. It’s currently about 9%, it might increase over the coming months, and then (hopefully) it’ll return to more normal levels.
Prices in your shop will probably need to increase to fund your pay increase. You will also probably need to optimise workflows to increase productivity. Embrace these changes to help the business be viable and sustainable.
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This article was originally published for subscribers to our Life, Work & Careers in Coffee newsletter. We’ve re-published it today as inflation continues to rise to help coffee people and businesses better manage the coming months. Inflation was ‘just’ 5% when we originally wrote this piece in January 2022. For the sake of clarity we’ve updated the examples to reflect today’s ONS announcement. The Bank of England now expects inflation to peak at over 10% later in 2022 before returning towards more normal levels over 2023.