Employees at Rolls-Royce, one of the largest manufacturers in the U.K., are getting a £2,000 ($2,455) bonus and pay raise to help cope with “economic uncertainty” the engine maker said, as the country’s cost of living crisis skyrockets.
“We are living through exceptional times,” the engine maker’s CEO Warren East said in a memo outlining the proposed salary hikes on Monday, according to the Financial Times.
Inflation reached a four-decade high in the U.K. in May, hitting a 9% increase over the same month last year. The war in Ukraine is the main contributor to British inflation. The conflict has driven up energy prices across Europe. U.K. gas and electricity prices were up 53.5% and 95.5%, respectively, in April compared with a year earlier. High oil prices have also inflated consumer prices across the board, while the average British salary has fallen 1.2% in real terms.
Rolls-Royce says it will issue the one-time bonus to 14,000 of its roughly 20,000 U.K. staff, covering 11,000 shop-floor factory workers and 3,000 junior managers. The 11,000 laborers will also be offered a 4% pay increase, backdated to March, if the workers’ union accepts the pay raise. Rolls-Royce says the hike is the largest annual pay raise staff have received in a decade.
Still, East told staff that a “simple wage increase” is “just not affordable and, in fact, it would be irresponsible,” suggesting the £2,000 bonus is a compromise on offering employees a permanent higher pay package. Taken together, East says the 4% pay bump and the £2,000 bonus would amount to a 9% worker pay increase for the year, which is in line with current inflation rates but saves the company from committing to salary increases beyond 4% long term.
The pandemic has trashed Rolls-Royce’s bottom line. Service payments from airlines, which are based on how many hours jets fly using Rolls-Royce engines, constitute a significant portion of the engine maker’s revenue. When many flights were grounded in 2020, Rolls-Royce revenues dropped 20%, and the company posted a $2.55 billion operating loss for the year.
Rolls-Royce returned to profit in 2021, after slashing 9,000 jobs from its 52,000-strong global workforce. The company earned $152.20 million profit in 2021 and told investors in February that it expects to be “modestly” cash positive for the year ahead.
But East told staff that larger wage increases could damage the company’s “future competitiveness in the U.K., by adding too much cost into the long-term wage bill at times of such high uncertainty.” The proposed 4% salary increase and $2,455 bonus handout will cost Rolls-Royce around $55 million this year.