Hay Group research: Pay increases will be higher in 2011

Private sector pay increases in 2011 will be higher than in 2010, at a median 2.5%, while public sector employees will see a rise of only 0.4%, according to Hay Group’s Reward in 2011 report.

The majority (82%) of private sector organisations indicated they would increase salaries in 2011. Less than half (39%) of public sector organisations plan to increase salaries, according to the research, which is based on forecast data from HR and reward professionals in over 200 medium and large organisations.

Only 26% of private sector firms experienced a pay freeze in 2010. Three-quarters (78%) of organisations intend to lift the freeze during the coming year.

In the public sector, 50% of organisations had a pay freeze in 2010, with just 15% planning to lift the freeze this year.

The report also found an anticipated increase in bonus payments. The majority (71%) of private sector organisations intend to pay bonuses in 2011, up from 46% in 2010. Almost three-quarters (73%) of firms expect short-term incentive payments to be on, or above, target in 2011, up from half in 2010.

Claudia Canavesio, reward expert at Hay Group, said: “Increasing wage budgets reflect gathering confidence in business conditions, but salary rises will remain behind inflation, representing a fall in real term pay for UK employees in 2011

“The return of short-term incentives not only reflects improving performance, but also the need for [employers] to retain high performers as the business environment picks up.”

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