Dental Business Coach – pay rises and dealing with inflation
This month Chris Barrow reflects on pay rises in dentistry and how inflation is causing more team members to ask for a pay review.
Team members are now tapping on the door and asking when they are getting a pay rise. This is in view of the fact that their cost of living is going up.
I find this a very interesting phenomenon.
Just to amuse my own curiosity, I did some research on the last time inflation actually passed the 5% per annum mark.
At the time of recording this video, we’ve got a rate on inflation at about five-and-a-half per cent projected for the full year.
The answer – 1991/92, 30 years ago is when inflation passed 5%.
What that means is that in fact two thirds of the current UK workforce have been in work during a period of history when inflation has consistently been below 5%. In fact, for very large periods of time, considerably below 5%, closer to the 2% per annum mark.
So, 66% of the workforce have never had to deal with a situation in which their cost of living has been rising very rapidly.
Reflecting on previous experience
I am going to be a boring old man and take you back to my first two decades in work.
That was the 1970s and 80s, where not only did we regularly see inflation above 5%, we regularly saw double digit inflation over 10% and beyond. Our cost of living was rising very rapidly on a year-by-year basis.
Back in the 70s and the 80s when my cost of living went up, did I go and knock on my bosses door and ask for a pay rise? The answer is very definitely no.
I worked in Corporate UK at that time and it was drilled into us from our first day at work that your pay would be reviewed on an annual basis.
Whether that was the 1 January or whether it was the first of the tax year. You might then be given an inflation-based adjustment.
In fact, I work for a very enlightened employer who used to automatically adjust wages on the 1 January each year in line with the increase in the average earnings index for the previous year. But then you would go into an annual appraisal and any further increase would be based on merit. It’s based on performance.
It would be based on promotion and on additional qualifications.
You therefore had to work for the pay rise by putting more in.
Annual pay reviews
Now of course, I can imagine a lot of rolling eyeballs about stories from the 70s and the 80s. But I did just want to share with you a timely reminder that you might, as the owner of the business, have to go back and re-educate your own team members as to the fact that there is no such thing as a real-time pay rise. The sooner we remind ourselves of those annual pay review dates the better.
So, how do you cope?
How did we cope back in the 70s and the 80s with the increasing cost of living?
We tightened our belts. And we spent less.
We became more careful with what we did with our money. And perhaps now the time is right to review that philosophy.
Average earnings in 2021 were up by around four-and-a-half per cent.
And at the moment we have a rate of inflation at about five-and-a-half per cent.
The Bank of England tells us it’s going to stabilise before the end of the year – we shall see.
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