Average UK pay rises to reach 3% in 2016

iain-nichols

Average UK pay rises are set to reach 3% in 2016, according to research by Willis Towers Watson.

Its Salary budget planning study report, which received 8,000 responses from organisations across 110 countries worldwide, primarily in the private sector, found that the average UK pay rise of 3% paired with low annual inflation rates in the first half of the year will outstrip real-term pay increases in other major European economies.

The research also found that Germany will experience a similar increase to the UK, and Italy, France, and the Netherlands are expected to see average pay rises in the region of 2.5% in 2016. Organisations in Spain, Switzerland and Ireland are budgeting for pay rises of around 2%.

Iain Nichols (pictured), senior consultant in the data services practice at Willis Towers Watson, said: “A combination of good pay rises and continuing low inflation means that British employees will feel they have more money in their pockets. Western Europe sees a similar trend as most countries’ pay rises are set to significantly outstrip inflation, but with predicted increases in inflation across the region we may see a return to pay growth less than inflation in the coming years.

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“Brexit has widely been predicted to have a negative effect on salary and although early statistics from the Office for National Statistics have suggested there may have already been a slowdown in earnings, it is not something we have seen in our data. This suggests that [organisations] are not amending their budgets and are using a wait and see approach to their salary planning in the UK.

“It will be interesting to see how [organisations] react to increasing inflation. We predict there will be greater emphasis on pay rises to high performers, emerging talent and those with in-demand skills, and less emphasis on across-the-board increases. Without differentiation, [organisations] may face retention and attraction pressures, especially in high demand areas.”