Median basic pay expected to rise by 1%

Median basic pay is expected to increase by 1% over the 12 months to March 2018, compared to pay rise expectations of 1.5% between October-December 2016, according to research from the Chartered Institute for Personnel and Development (CIPD) and The Adecco Group.

The Labour market outlook: spring 2017 report, which surveyed 1,060 HR professionals and employers, also found that median pay increase expectations for the next 12 months are 2% in the private sector, compared to 1% in both the public sector and the voluntary sector.

The research also found:

  • 45% of respondents that are planning to make a pay decision in the next 12 months expect basic pay to increase at their organisation during this timeframe, compared to 11% of respondents that intend to freeze pay, and 1% that expect basic pay to decrease over the next 12 months.
  • 15% of public sector respondents believe there will be a pay freeze in their organisation, compared to 9% of private sector respondents.
  • 31% of respondents that expect basic pay to rise by 2% or more cite their organisation’s ability to pay more as the reason for this increase, 30% cite April 2017’s increase in the national living wage rate, and 29% identify the rate of pay rises elsewhere as a driving factor.
  • 27% of respondents that expect basic pay to rise by at least 2% cite recruitment and retention issues as the reason for this increase, and 25% cite improved employee productivity and performance as the reason.
  • 38% of respondents that expect pay to either rise by less than 2%, to stay at its current rate or to decrease, cite their organisation’s inability to pay more as the reason for this, 45% cite public sector pay restrain as the reason, 11% name  auto-enrolment costs, and 15% cite the increase in the national living wage rate.
  • 31% of respondents expect to award a basic pay increase of between 1% and 1.99% in the 12 months to March 2017, and 27% expect basic pay to increase by between 2% and 2.99%.

Gerwyn Davies (pictured), labour market adviser at the CIPD, said: “The weak pay data is no surprise given the continued weak productivity growth in the UK. However, this is being exacerbated by many employers’ passive attitude towards workforce development and training, despite reporting hard-to-fill vacancies.

“At the same time, private sector employers are proving stubbornly unresponsive to labour market changes that should, in theory, act to increase wages, such as the number of unfilled vacancies. The data suggests that the introduction and increase of various labour costs, such as the government’s auto-enrolment scheme and the apprenticeship levy may be part of the explanation. It’s crucial therefore that we see a pick-up in employer investment in workforce skills development to support and sustain productivity growth.”