31% of employers predict a basic pay increase of between 2% and 2.99%


Under a third (31%) of employer respondents anticipate a basic pay increase of between 2% and 2.99% in the next 12 months, according to research by The Chartered Institute of Personnel and Development (CIPD) and The Adecco Group.

Its Labour market outlook: Autumn 2017 report, which surveyed 2,007 senior HR professionals, also found that 30% of respondents increase their organisation’s average basic pay by 2% or more to keep up with the rate of pay rises elsewhere. This is compared to 27% who increase average basic pay by more than 2% to help tackle recruitment and retention issues, and 19% who do so to improve employee productivity and performance.

The report also found:

  • Respondents expect median basic pay to increase by 2% in the 12 months to August 2018.
  • 46% of respondents who are planning to make a pay decision in the next 12 months expect basic pay to increase at their organisation during that time frame, compared with 8% who predict no pay increases.
  • 14% of respondents based in the north of England report they will have a pay freeze in the next 12 months, compared with 5% of respondents who are operating in the south of England.
  • 45% of respondents do not know how their organisation’s basic pay will be affected by the next pay decision, or that it is too hard to tell and will depend on their organisational performance.
  • 30% of respondents plan to award a basic pay increase of between 1% and 1.99% over the next year, compared to 11% who expect basic pay to increase by between 3% and 3.99%. In addition, 10% of respondents believe basic pay will rise by 4% of more in the 12 months to August 2018.
  • 42% of respondents who predict that average basic pay will increase at their organisation by less than 2% or not at all believe this is because of restraints on public sector pay, compared to 34% who cite affordability and 10% who feel that uncertainty about the UK’s future trading arrangement with the European Union (EU) is acting as a brake on basic pay growth in their organisation.
  • 24% of respondents based in the private sector are under some or significant pressure to raise wages from the majority of their workforce, compared to 38% of private sector respondents who face no pressure to increase pay, and 36% who experience some or significant pressure to raise wages for certain roles, such as high and middle-skilled jobs.
  • 59% of respondents in the public sector state that they are under some or significant pressure to raise wages for the majority of the workforce, compared to 25% where the pressure is more to increase pay for certain roles.
  • 23% of private sector respondents believe the lack of pressure to raise wages can be attributed to the recognition upon employees that the organisation cannot afford more generous pay increases.

Gerwyn Davies (pictured), senior labour market analyst at the CIPD, said: “This survey provides further evidence that productivity has a far more significant bearing on pay growth than the tightness of the labour market. Over time we might expect low unemployment levels to lead to increased pressure on pay, as the Bank of England has predicted. However, it’s the UK’s ongoing poor productivity growth that’s currently preventing employers from paying more, not their inability to find or retain staff. This is why the Chancellor in this month’s Budget has to prioritise investments that will support workplace productivity improvements. For example, investing in support for small firms and skills development initiatives that can help to drive productivity gains over time.

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Alex Fleming, president of general staffing at The Adecco Group UK and Ireland, added: “A tailored and detailed approach to workforce planning and talent management has never been so vital for organisations to thrive in the UK’s uncertain political climate. This level of detailed planning requires an in-depth understanding of individual marketplaces, industries and talent pools.

“It is important to note that productivity remains as a critical and national issue for the majority of employers as well as some specific sectors, whilst some other sectors have other priorities and are focused on filling specific skills gaps which are vital to their business model’s success. The key takeaway is for organisations to remember that talent mapping remains prudent; organisations need to be ready to react quickly to possible future talent restrictions.”