Employers face a difficult challenge keeping office workers motivated as consumer spending power continues to decline.
A new study conducted by Vocalink – the firm responsible for processing 90 per cent of salaries – reveals that inflation has eaten into employee earnings in the last four years.
Average pay grew by just 0.4 per cent in the last three months, down from 0.9 per cent in the previous quarter, reports the Telegraph.
At the same time, Consumer Price Index inflation reached 2.7 per cent – meaning employees are getting less value for their earnings.
Vocalink reported that employees took home £1,494 on average per month in real terms during 2012.
This is down on the £1,583 per month earned in 2008, before the credit crunch and onset of recession.
In 2012, workers took home £1,494 on average per month in real terms, compared with £1,583 per month in 2008, the FTSE 350 index showed.
David Yates, chief executive of Vocalink, said pay packets have failed to keep up with inflation for a significant period of time.
As such, employees are seeing a squeeze on household finances, which is potentially putting them under greater pressure and distracting them at work.
“Inflation at present is a particular concern as we are seeing an increase in prices of essentials,” he stated.
Douglas McWilliams, chief executive of the consultancy Centre for Economics and Business Research, said things could even get worse during 2013.
Speaking to the news provider, he noted that energy prices are scheduled to increase in December and January, and this will drive inflation.
The cost of living is set to ramp up and remain elevated throughout much of 2013, Mr McWilliams claimed.
“As such, it could be some time before incomes regain spending strength,” he stated.