(Reuters) -Labor union Unite on Tuesday rejected Rolls-Royce's latest pay offer, which included a 2000 pound ($2,455) cash lump sum to much of the aircraft engine maker's British workforce, saying it fell short of expectations.
The British company earlier in the day said it was offering the lump sum to about 70% of its UK workforce to help them steer through rising living costs.
"The revised offer still falls a long way short of the cost of living crisis claim submitted by our members and their expectations. Unite senior reps are in discussions to decide next steps," a Unite union spokesperson said via email.
Britain's economy initially rebounded strongly from the COVID-19 pandemic but is now battling high living costs worsened by a combination of labour shortages, supply-chain snags, post-Brexit trade problems and the war in Ukraine.
The UK aero-engine group said that it would give the cash lump sum to 11,000 shop-floor workers as well as 3,000 junior managers.
In an emailed statement to Reuters, a Rolls-Royce spokesperson said the company was also offering a 4% pay raise back-dated to March to 11,000 UK shopfloor workers.
The company added it was the first time it was offering a "bonus" that was linked to the economic climate and not performance.
Rolls-Royce said 3,000 workers would receive the cash in August, while the other 11,000 would get the amount when the deal was approved by the union.
The move comes days after British Prime Minister Boris Johnson warned that a sharp hike in wages would risk fuelling further price rises, adding that increasing pay to match inflation risked a wage-price spiral.
Shares of the London-listed firm closed 0.7% lower at 90.83 pence.
($1 = 0.8137 pounds)
(Reporting by Amna Karimi and Shanima A in Bengaluru, Sachin Ravikumar in London; editing by Jason Neely and Devika Syamnath)