CIPD/KPMG research: Pay inflation may rise in next twelve months

Pay inflation may rise over the next twelve months, as new research from the Chartered Institute of Personnel and Development (CIPD) and KPMG has found that more employers have forecast that they will increase salaries.

This quarter’s Labour Market Outlook found that average pay award expectations across all sectors has risen to 1.7% from 1.3% last quarter.

The survey of employers also revealed that the average size of the predicted pay award has increased from 2.3% last quarter to 2.5%, but is still well below the future rate of inflation.

The report showed that the main cause of the expected increase in salaries is organisations’ ability to pay (31%).

This indicates that firms have more money to spend on pay awards.

While inflation is currently high, it has not yet resulted in a sharp rise in the level of forecast pay rises; only 18% of organisations report an upward pressure on salaries and just 6% cite recruitment and retention issues will result in higher pay.

Pay forecasts in the public and voluntary sector are far more subdued than the private sector, public sector employers predict pay to increase by just 0.3% over the coming year, while the voluntary sector reckon it will increase by 1.5%.

Charles Cotton, reward adviser at the CIPD, said: “If a salary rise indicates an organisation’s confidence in the future then, given the rise in pay predictions revealed by this research, private sector firms are becoming less wary of what the next 12 months has in hold for them.

“By contrast, most public sector employers do know what the future has in store for them over the coming year.”

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