50% to increase pay by more than 2% in 2018

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Half (50%) of employer respondents are planning to increase pay for their employees by more than 2% in the next year, according to research by business organisation British Chambers of Commerce (BCC) and online recruitment firm Indeed.

The survey of 1,020 organisations also found that 32% will provide pay increases of between 2% and 5% for their staff, compared to 12% that will increase employee pay in accordance with consumer price inflation.

The research also found:

  • 6% of respondents will increase their employees’ pay by more than 5% in the next year, whereas 18% that will offer pay increases of between 1% and 2%.
  • 2% of respondents expect to have to decrease employees’ salaries.
  • 37% of respondents will respond to national living wage increases over the next three years by raising the prices of their products and services. Meanwhile, 23% will take lower margins and profits, 16% will increase investment in automation and 16% will recruit more staff on flexible contracts, such as self-employed contractors.

Jane Gratton, head of business environment and skills policy at the BCC, said: “This is good news for employees who have felt the squeeze in their pay packets in recent months. People and skills are the most important asset for businesses, and so employers will want to pay a great wage that motivates and retains their team. But, the cost of wage increases has to be offset in some way, for example by greater productivity, lower costs or higher prices.”

Tara Sinclair, senior fellow and economist at Indeed, added: “It would be understandable if [employees] had felt a little out of pocket so far this year as wage growth in the UK remained stubbornly low. Record employment has also added pressure on employers who must compete in a tight labour market and do so usually by offering bumper pay packets.

“These figures suggest brighter times are ahead for [employees], who after seeing their wage growth barely exceed inflation could receive a meaningful pay rise. Couple these findings with the recent public sector pay hikes and it appears organisations are feeling more confident despite continued uncertainty. The question now is will they raise wages enough to continue to outpace price rises?”