Employers report pay increase expectations of just 2% for the year ahead

Labour market outlook

According to the autumn 2018 Labour market outlook report by the CIPD and the Adecco Group, employers report median basic pay increase expectations of just 2% for the period up to September 2019.

The report, for which YouGov polled 1,002 HR professionals in September 2018, found that almost half (48%) of organisations that have experienced increased difficulty recruiting staff during the past 12 months have increased starting salaries in response.

More than a quarter (27%) have done so for the majority of vacancies, while around a fifth (21%) have done so for the minority of vacancies.

Alex Fleming, country head and president of staffing and solutions at the Adecco Group in the UK and Ireland, said: “The labour market in the UK is tight and this research is reporting high levels of recruitment and retention difficulties. While the data is not showing wages rising across the board, we are regularly seeing this pressure being exerted in the recruitment space.

“Our clients are often surprised at the market rates when they are making talent-attraction decisions. This ‘supply shock’ and other pressures will only serve to increase these difficulties, which could easily flow out into the rest of the workforce. In turn, this could cause a wider upward movement on wages.

The Labour market outlook report also found that, of those organisations that have experienced increased difficulty retaining staff over the past 12 months, just over half (51%) have increased salaries. Among these, 28% have raised salaries for the majority of staff and 23% have done so for key staff only.

However, almost half (47%) of employers have not raised salaries at all in the face of rising retention difficulties.

Fleming said: “Employers should be aware that wages are not the only answer, as for in-demand employees, marginal salary gains may not be what they most desire. We’ve seen wider benefits packages, which include flexible working, and a good culture often win over a simple increase in salary.”