There are ways to help ease the pain of soaring inflation - Sarah Coles

Figures out this week revealed that inflation overtook wages in November – so your pay packet is worth less and less as the months pass.

However, there is an alternative to the ever-decreasing circle of cutting back, because there are still some steps you can take to boost your wages.

Pay rises have been slowing since last summer, while inflation has been accelerating, so we were always likely to reach this point eventually. It happened in November, when wages (excluding bonuses) fell 1 per cent after inflation. And there’s every chance this trend will continue for at least the next few months.

The pain won’t be felt evenly, because pay rises differ dramatically between sectors. Those in the financial and business services sector have seen inflation-busting 6.8 per cent rises during the year, while the private sector saw wage rises of 2.6 per cent and the manufacturing sector saw wages increase by just 2.1 per cent in a year – less than half the rate of inflation.

We’re no strangers to falling wages. In the aftermath of the financial crisis, pay spent 12 years in the doldrums, and we only actually saw pay rises above pre-crisis levels in February 2020 – just as the pandemic was warming up.

However, during most of this period, inflation was incredibly low, so although wages didn’t keep pace, there wasn’t the worry that suddenly your bills would shoot up by hundreds of pounds overnight.

This time round, we have runaway energy and petrol costs, and the added fear that things could get much worse before they get better. For those whose finances are already on a knife edge, this could be the final straw. If you’re worried about inflation, and your employer isn’t showing signs of increasing wages any time soon, there are three options.

You may be able to convince your employer to pay you more by asking for a pay rise. You’d be forgiven for thinking you have every right to march in and insist they increase it with inflation, because it’s the right thing to do, but in reality there are more effective approaches.

The best way to start is to research what people are being paid for the same job elsewhere – somewhere like Glassdoor.co.uk. Then build your case by considering the areas where you have gone above and beyond what was expected of you.

If you have any proof of the value you added to the business as a result, then even better. You can also consider specific projects you have taken on, or any extra training you’ve done to add weight to your request.

Ideally, you should find the right time to ask – which could be around your appraisal, or when the business is setting budgets for the year. Then set up a meeting with your manager, and make your case.

If they refuse, if times are tough, or if your employer has a strict approach to pay rises, with no room for negotiation, you can go for promotion instead. In some organisations, this will mean having to wait for an internal vacancy to come up and apply for it.

In others, there’s scope to be promoted wherever you are in the business, if you can make a good enough case for it.

Again, success lies in the preparation, and considering where you’re adding value to the business over and above what’s expected of you. If you’re not entirely sure whether you’ll be considered ready for a step up, you can start with an informal chat with your manager about what they would expect to see from you before considering you for promotion.

Finally, if your current employer isn’t going to budge, you can consider moving. Right now, vacancies are at a record high, and 16 per cent of employers say they’re short of staff, so there may be alternatives.

Unfortunately, there’s not always the right job for you in the right place at the right time, so nothing is guaranteed. If jobs are thin on the ground in your area, it’s worth putting yourself in the best possible position to find a new role.

That means working on your CV, signing up to jobs sites, and building your networks – by asking around in person and delving into the world of LinkedIn. Self-promotion on social media may not come naturally to you, but plenty of firms advertise and recruit there, so it’s at least worth considering.

Some people will find a new job and then use it as leverage to negotiate a pay rise. However, if you take this approach, you need to be prepared to follow through and move if they refuse.

Sometimes all your best efforts will come to nothing, so you need to consider an alternative. In the immediate aftermath of the financial crisis, when I was working for myself, after trying and failing to put up my rate, the only way I got a pay rise during that lost decade was by simply doing more work.

Once we’ve got through the first half of this year, economists are predicting that inflation will ease off and wages will catch up again. So given enough time, the problem will solve itself.

If, in the interim, you’ve secured a new job, a pay rise or a promotion, you could be one of the very few people who emerges from 2022 stronger than when they started.

Costs: Prices are soaring and there is the added fear things could get much worse before they get better.

CPI inflation hit 5.4 per cent in December – the highest it has been for 30 years. And this isn’t the last of it: the Bank of England expects inflation to peak around 6 per cent in April, but unless there’s significant intervention in the energy market, there’s every chance it could go hit 7 per cent.

Higher inflation makes it even more difficult for your savings to keep pace with price rises, but they’ll be outstripped even further if you settle for the rock bottom rates on offer from the high street banks. Instead of putting up with a derisory 0.01 per cent on your emergency savings, you can get up to 0.72 per cent on the most competitive easy access account.

Once you have this in place, for money you will need during the next five years, you can consider fixing for the most appropriate period. When inflation is on the rise like this, it always sparks talk of rate rises. The Bank of England could decide to hike rates again within the next three weeks to keep inflation under control. You might be tempted to put off fixing your rate in the hope that savings rates will rise after the next Bank of England announcement.

However, we can’t guarantee when rates will rise, and even if they do, we can’t be confident banks will pass them on.