Pay prospects improve for 2012

Employers predict there will be a positive shift in pay prospects for 2012, although uncertainty still prevails, according to research by the Chartered Institute of Personnel and Development (CIPD).

Its survey of more than 1,000 employers showed that the last quarter has seen pay intentions reach their highest level since spring 2009. The expected mean basic pay settlement was 1.7%, compared with 1.5% in the previous quarter and 1.3% at the same time last year.

In the private sector, 35% of employers predict a pay rise (which is unchanged from last quarter), with the average increase creeping up from 2.1% to 2.2%.

Among those planning to increase pay, manufacturing and production firms are forecasting the highest rises (2.9%), followed by those in the service sector (2.7%).

The replacement of a pay freeze with a 1% pay cap in the public sector has seen the proportion of employers forecasting a pay increase in this sector jump from 12% to 30%, with average public sector pay increases jumping from 0.3% to 0.8%.

On average, 16% of all employers predict a pay freeze for the coming year, but this ranges from 9% in the private sector to 40% in the public sector.

But despite the upward movement in pay predictions, the survey also revealed a level of uncertainty prevails among many employers, particularly in the private and voluntary sectors, with 55% and 56% respectively feeling unable to predict the outcome of their pay decision, because it is too early to say.

Charles Cotton, reward adviser at the CIPD, said: “While the predicted increases in pay settlements reflect a cautious optimism among members in the private sector that the worst may now be over, uncertainty about how fast the economy will improve is acting to moderate pay forecasts and leading many employers to hedge their bets on the outcome of the final decision.

“As we move further into the pay round and as organisations get a better idea of how well they and the economy are likely to perform, we should see fewer feeling unable to predict the outcome of their annual pay decisions.”

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