17% cite auto-enrolment as a limiting factor on wage growth

Gerwyn Davies-CIPD-2016

Around a fifth (17%) of respondents cite pensions auto-enrolment as a reason why they were unable to raise basic pay by 2% or more in 2015, according to research by the Chartered Institute of Personnel and Development (CIPD).

Its quarterly Labour market outlook report, based on a survey of 1,007 HR professionals and employers, also found that 14% of respondents unable to increase wages by 2% or more name the October 2015 increase in the national minimum wage as a limiting factor.

The study also found:

  • Median basic pay increases of 1.2% are expected in 2016, compared with 2% just three months ago.
  • More than a third (36%) of respondents said affordability was a key reason why they could not offer more generous pay increases in 2015.
  • 21% of private sector respondents cite the increase in the national minimum wage in October 2015 as a limiting factor for wage growth.

Gerwyn Davies (pictured), labour market analyst at the Chartered Institute of Personnel and Development, said: “The feedback we’re seeing from employers suggests that official forecasts for wage inflation for 2016 are too optimistic. A significant proportion of employers have already reported increases in employment costs as reasons why they have limited pay rises in the last 12 months to 2% or less, and looking ahead these cost pressures will only increase.

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“For example, many organisations will see further increases in labour costs as a result of the national living wage from April this year.

“Budgets remain tight, so if there are any pay rises to be given, it’s likely that employers will target financial rewards towards high-performers and those with in-demand skills that are difficult to replace, rather than the workforce as a whole.”