The median base pay rise expectation among UK employers for 2023 is 5%, according to research by the Chartered Institute of Personnel and Development (CIPD).
The CIPD’s quarterly ‘Labour Market Outlook’ reported that this was a record high since the survey began in 2012.
In the public sector, the median base pay rise expectations were lower, at 2%.
More than half (55%) of employers said they expected to raise base or variable pay further in 2023, in order to meet recruitment and retention challenges.
Seven in 10 (71%) employers expected to hire in the next three months, but 57% said they were dealing with hard-to-fill vacancies. This was touted as either a significant (29%) or minor (36%) problem over the next six months.
Those organisations that planned to raise pay in response to recruitment problems reported that they were more likely to achieve this by raising prices (57%) than absorbing the costs (47%).
More than a third (36%) of employers said they were planning to increase their focus on hiring those who were returning to work after a career break, such as to have a child or deal with a health condition, compared with 29% reporting that they had done so in the past three years.
Jon Boys, senior labour market economist for the CIPD, said: “Skills and labour remain scarce in the face of a labour market which continues to be surprisingly buoyant given the economic backdrop of rising inflation and the associated cost-of-living crisis.”
He added: “Many employers are recognising the potential to attract certain groups to fill vacancies, particularly older workers, carers and those with health conditions, but this also requires a focus on improving job quality, particularly flexibility.
“The forthcoming introduction of a day one right to request flexible working should prompt more employers to ensure that they advertise jobs as flexible and provide a range of flexible working practices to attract and retain a more diverse workforce.
“However, more needs to be done to help provide employers, particularly [small to medium enterprises], with access to occupational health services or support, to help them to keep our ageing workforce healthy and in work.”