Median pay expected to increase by 1.7%

Pay RiseA median pay increase of 1.7% is expected between March 2016 and March 2017, according to research by The Chartered Institute of Personnel and Development (CIPD).

The Labour market outlook report, which surveyed 1,014 HR professionals and employers who are CIPD members, also found that median base pay expectations are higher in the private sector (2%) than in the public sector (1%) and voluntary sector (1%).

The research also found:

  • Of those respondents that expect to award a 2% or more basic pay increase, 33% cite affordability as the key reason behind this, 28% name recruitment and retention issues, and 29% point to the introduction of the national living wage.
  • Of those respondents that expect basic pay awards to increase by less than 2%, 40% name affordability as a key reason for this, 21% cite the introduction of the national living wage, and 11% point to the cost of auto-enrolment.
  • The median basic pay award in the year to March 2016 was 2%. The median basic pay increase was 2% in the private sector, 1.4% in the voluntary sector, and 1% in the public sector.
  • 68% of respondents conducted a pay review in the last year, 67% of which increased pay, 19% froze pay, and 1% reduced pay.

Mark Beatson, chief economist at the CIPD, said: “The UK is now in its eighth year of productivity ‘go-slow’ which continues to limit the scope for employers to pay more and recruitment and retention problems have so far proved manageable without across-the-board pay raises. This survey provides no indication of this situation changing any time soon.

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“On top of this, employers are having to manage the consequences of government-imposed increases to the cost of employing people. The national living wage and roll-out of pension auto-enrolment were introduced to improve the living standards of low-paid employees, but this can only happen without significant job losses if the productivity of low-paid employees also increases.

“Simply making low-paid labour more expensive is not the answer and the government shouldn’t be surprised if some employers choose easier options, such as reducing hours, chipping away at other benefits or making less generous pay award the next time pay is reviewed. The government needs to provide greater support and employers are going to have to be more and more creative in how they manage reward and motivate employees.”