ONS figures reveal huge cost to workers of underpayment

ONS figures reveal huge cost to workers of underpayment by stingy employers - Even modest underpayment can cost an average worker more than £1 million over the course of a typical career

Data analysis reveals the staggering cost to an average worker of persistent underpayment by employers. According to ONS figures, the average full-time annual salary in the UK in 2022 was £33,280, and the average annual increase over the course of the past 40 years has been 6.6%. If we assume increases over the next 40 years will be similar, a persistent underpayment of annual uplift of just 10% - meaning an increase of 5.94% instead of 6.6% - will result in a total loss to the average worker of more than £1 million.

Assuming average increases over the next 40 years will be similar to the past 40 is not unreasonable. Over the course of a long career, there will be ups and downs, and there’s no reason to assume the future will be markedly different to the past.

Initially, the loss appears modest. Getting an increase of 5.94% instead of 6.6% on an average salary only results in an annual loss of £220. But if the underpayment is allowed to persist, over time the loses compound. Ten years into a career the annual shortfall is almost £3,800. After 20 years, it has ballooned to almost £14,000. By the time you are ready to retire, you’ll be earning a staggering £94,000 per annum less than a comparable worker who has succeeded in maintaining the average annual increase. Adding up all these annual loses results in a total career-long loss of £1,016,886 for the average worker.

Obviously, £1 million will be worth less in 40 years, but it will still be a very significant sum of money. If the annual loses had been invested – in a pension, for example – the lifestyle of the retiring worker would be transformed.

This is why I wrote The Naked Negotiator. With three-quarters of workers in the UK unrepresented by unions, it’s vital that individual workers have the knowledge and confidence to challenge bosses about pay.

After a long career negotiating commercial contracts for public and private sector organisations across the globe I have applied my negotiation expertise to what for many people is one of the most daunting career challenges they will face.
Whilst the book is for everyone, it is particularly pertinent for women. A recent poll of more than 9,000 employees conducted by employment agency Robert Walters showed that men were 23% more likely than women to negotiate a rise at all stages of their career. More women than men (22% and 13% respectively) cited lack of confidence as a factor.

As the father of three daughters, I am particularly passionate about this subject. The book is unashamedly popular and quick and easy to read, and is written in a narrative style, providing the reader an academically robust and thorough presentation of negotiation theory in a light-hearted and entertaining manner. The lead character, Ellen, is a talented, intelligent young manager who loves her job. Her employer, good in every other respect, has not been generous with pay for several years, and she knows she must increase her earnings if she is going to do what she wants with her life. She meets an eccentric, aged negotiation expert – the Naked Negotiator – and they embark on an entertaining and illuminating journey together. Charismatic, but at the same time rather oddball, the Naked Negotiator leads Ellen through every aspect of the important negotiation she is facing. Sometimes funny, sometimes daunting, always entertaining, Ellen’s journey culminates with her achieving more than she ever dreamt possible, and the story ends with an engaging twist.

The book can be read in a couple of hours, but it could transform the financial course of your life.

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