Employers struggle to pay salaries that keep up with inflation

Employers continue to struggle to close the gap between basic salaries and the cost of living, according to research by the Chartered Institute of Personnel and Development (CIPD).

Its Spring 2012 Labour market outlook survey of more than 1,000 employers found that pay award expectations for the next 12 months have fallen to 1.5%, from 1.7% three months ago.

Public sector organisations’ predictions of average basic pay award expectations of 0.3% continue to lag behind organisations in the private (2.2%) and the voluntary sectors (1.7%).

The study also found:

51% of respondents remain unable to predict whether salaries will rise or not over the next 12 months.
Employers in the private sector (56%) are most uncertain about what their next pay decision will be.
The manufacturing and production sector (43%) is less tentative about what their next pay decision will be
21% of respondents have decided to postpone any pay decision until later in the year.

Charles Cotton, reward advisor at the CIPD, said: “Our data shows that many employers are keen to raise pay in line with inflation, but are struggling to close the gap as inflation remains stubbornly high.

“Line managers and HR professionals need to look at how they can continue to keep employees engaged and performing well in the absence of substantial pay rises, while, at the same time, limiting the impact of financial distress on employees by offering financial education, debt counselling and voluntary benefits packages.”