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What jobs might get affected by a potential pay freeze in 2021?

What jobs might get affected by a potential pay freeze in 2021?
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Millions of public sector workers in the UK are facing a pay freeze in 2021 as part of government efforts to rebuild public finances that have been hit hard by the coronavirus pandemic. Chancellor Rishi Sunak is set to provide more details about this pay freeze during Wednesday’s Spending Review.

Here’s a quick overview of these potential pay cap measures including the jobs that might be affected.

What is a pay freeze?

A pay freeze means workers do not receive wage or salary increases for a set period of time.

While you’d still get the same salary or wage, a pay freeze would in effect be a pay cut. That’s because salaries and wages are not likely to keep up with inflation, which is currently at 0.5%.

Why will there be a pay freeze?

The UK government has spent a lot of money fighting the coronavirus. This has put a massive strain on public finances. Capping wage and salary increases for public sector workers could help ease this strain.

The Institute for Fiscal Studies says that a public sector pay freeze could save the government up to £3.7bn. While this is way short of the £200bn (and counting) that the government has used so far to fight the pandemic, it might still go some way in bolstering the country’s finances.

Furthermore, if the government was to impose a three-year pay freeze, this would slash as much as £23bn from the Treasury bill, according to the Centre for Policy Studies think tank.

Apart from the goal of easing the strain on public finances, a pay freeze could also have been driven by concerns about fairness.

The pandemic has hit people in the private sector hard, way harder than those in the public sector. Quite a number of them have lost jobs or had their wages reduced.

Besides, on average, public sector workers earn more than their private sector counterparts. They also enjoy other advantages, such as greater job security and much better pension provision.

A pay cut might bring about some much needed fairness between workers in the two sectors.

What jobs will the pay freeze affect?

Public sector workers expected to be affected by the pay freeze include teachers, policemen, soldiers and civil servants.

Frontline NHS staff, including doctors and nurses, will be excluded in recognition of their exemplary work during this pandemic. NHS managers are, however, believed to be among those who will have their pay frozen.

The exact number of people who might be affected is not yet clear, but we know it will be millions. The Times estimates that it will be four million. The BBC puts the number even higher at 5.5 million.

How has the news been received?

Not surprisingly, news about a potential pay freeze hasn’t gone down well with unions representing workers who might be affected.

Unite, the union that represents 1.4 million people, has said that the pay cap would be “insulting to those public sector workers that have underpinned the fabric of society during this continuing pandemic”.

Unison Secretary Dave Prentis has also expressed his displeasure with the measures, saying that the pay cap would be a “cruel body blow” to NHS staff not on the front line.

What can I do right now to protect my finances?

If you are one of those who might be affected by the potential pay freeze, here are three actions you can take right now to prepare and protect your finances.

Create a budget

A budget is a great tool to help you control your expenses, hold on to more of your money and plan for the future. You can use it to track your spending habits and create goals to help you save for things that matter most.

To get started, check out our article on how best to budget your money wisely.

Cut back on your discretionary spending

This is one of the easiest ways to reduce your overall spending and make savings.

The current lockdown measures provide an opportunity to cut back on non-essential expenses such as trips to the movies and regular night outs.  

Start an emergency fund 

An emergency fund can make a world of difference should life slap you with unexpected costs that could compromise your overall financial well-being.

You can begin building your emergency fund by squirrelling away a little every month until you have a sufficient nest egg to take care of emergencies.

To grow your savings even faster, consider putting them in an easy access savings account where the interest is higher than a regular account and you can access the money at any time with no penalties.

What next?

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