Employers expect median basic pay to rise by 1%

Gerwyn-Davies

Median basic pay is expected to increase by 1% over the 12 months to June 2018, according to research by the Chartered Institute of Personnel and Development (CIPD) and the Adecco Group.

Its Labour market outlook: summer 2017 report, which surveyed 1,139 HR professionals and senior decision makers, also found that 40% of respondents who are planning to make a pay decision in the next 12 months expect basic pay to increase at their organisation during that time, compared to 12% of respondents who plan to freeze pay.

The research also found:

  • 1% of respondents expect average basic pay to decrease in the next 12 months.
  • 18% of public sector respondents expect to freeze pay in the year ahead, compared to 10% of private sector respondents.
  • 34% of respondents plan to provide a basic pay increase of 1-1.99% in 2017, 22% anticipate a basic pay increase of 2-2.99%, and 11% expect basic pay to increase by 3-3.99%.
  • 25% of respondents cite the rippling effect of the national living wage as having an impact on pay decisions, and 33% state the going rate of pay elsewhere as a consideration when deciding pay.
  • 23% of private sector respondents cite delivering the national living wage as a reason why pay growth has slowed, 21% state uncertainty over access to the single market as having an impact on pay growth, 21% cite pensions auto-enrolment, and 21% identify affordability as reasons for weak pay growth.
  • 43% of respondents report that their wage bill has increased because of the national living wage.
  • 32% of respondents that have seen their wage bill increase as a result of the national living wage plan to take lower profits or absorb the costs, 29% plan to manage the increase through improved efficiency and increased productivity, and 18% plan to pass the costs on to consumers.
  • 52% of respondents would respond in some way if the government were to increase the national living wage in April 2018 from £7.50 to £7.80. This includes absorbing costs or taking lower profits (15%), improving efficiency and productivity to offset costs (13%), and reducing the number of employees through redundancies or recruiting fewer staff (12%).
  • Respondents expect median basic pay to rise by 2% in the private sector in the 12 months to June 2018, compared to 1% in the public sector, and 1.4% in the voluntary sector.
  • The median basic pay award among respondents that have conducted a pay review in 2017 is 1.5%.

Gerwyn Davies (pictured), senior labour market analyst at the CIPD, said: “Predictions of pay growth increasing alongside strong employment growth is the dog that hasn’t barked for some time now, and we are still yet to see tangible signs of this situation changing in the near term. The facts remain that productivity levels are stagnant, public sector pay increases remain modest while wage costs and uncertainty over access to the [European Union] market have increased for some employers. At the same time, it is also clear that the majority of employers have still been able to find suitable candidates to employ at current wage rates due to a strong labour supply until now.”

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Alex Fleming, president of general staffing at the Adecco Group UK and Ireland, added: “This quarter’s report demonstrates strong and stable employment intentions. These have remained in a positive range for the last two years during which time we have seen unemployment consistently fall. Context is important here though: employers continuing to hire isn’t, necessarily, an indication that they are convinced of a bright economic future, rather that nothing significant has changed in recent months. Many employers are getting on with the day-to-day hiring required to keep their businesses ticking along until they have enough information to build concrete recruitment plans.

“However continued subdued wage growth that the labour market is currently facing is a real issue that employers need to tackle head on. Employers must to invest in staff to increase productivity, thus in turn providing them with the opportunity to increase wage growth.”