Excluding bonuses, respondents planning a pay review over the year to June 2016 expect to give a median pay award of 2%, according to research by the Chartered Institute of Personnel and Development (CIPD).
Its quarterly Labour market outlook report, which surveyed 931 employers, also found that one in five plan to give a basic pay increase of 3% or more in their next pay awards.
The study also found that:
- Respondents in the private sector anticipate median pay increases of 2% in the year to June 2016, while rises of 1% and 1.5% are expected in the public and voluntary sectors, respectively.
- 71% conducted a basic pay review in the 12 months to June 2015. Around a quarter (24%) did not carry out a pay review and the remaining 4% were unsure if a review had been carried out.
- The median basic pay increase over the 12-month period was 2%. This is up from 1% in the CIPD’s previous Labour market outlook report, published in May 2015.
- 39% of respondents cite the ability to pay more as a key reason for the expected 2% pay award, while 30% list movement in market rates as a key factor.
- Around a quarter (26%) say that employee productivity and performance are key factors behind employers’ decision to award a pay increase of 2% or more, and 26% cite recruitment and retention issues.
Gerwyn Davies, labour market analyst at the CIPD, said: “At one end of the spectrum, workers in occupations where there are skills or labour shortages and thriving sectors such as finance and construction seem likely to get pay increases well above current inflation.
“However, at the other end of the scale, many workers in areas such as manufacturing and public sector, are seeing only a very modest increase in living standards.
“In between, the bulk of workers will continue to see moderate growth in their pay packets but with inflation expected to stay low, they should still feel the benefit of any increases.”