Just over one-third (35%) of employer respondents expect to implement a basic pay increase of between 2% and 2.99% in the year to June 2020, according to research by the Chartered Institute of Personnel and Development (CIPD) and the Adecco Group.
Its Labour market outlook: Summer 2019 report, which polled 2,104 UK organisations, also found that 36% predict that their basic pay awards will increase by at least 3% over the next year, compared to 28% of respondents that thought this in 2018. In addition, 18% of employer respondents plan to give a basic pay rise of between 1% and 1.99% in the next 12 months.
Overall, employers’ median basic pay increase expectations in the year up to June 2020 are 2%, although this increases to 2.5% for the private sector. Median basic pay awards for the public sector over the upcoming year, on the other hand, are 1.5%, compared to 1% three months ago.
Gerwyn Davies (pictured), senior labour market adviser at the CIPD, said: “Amidst the current political uncertainty, the UK labour market is holding up surprisingly well. Labour demand remains strong, and the robust supply of non-EU [employees] has helped many employers meet this demand; partly owing to the government’s decision to remove the migration cap for doctors and nurses.
“This has been key to freeing up visa capacity for employers in other sectors [that] have sensibly been able to resolve skill shortages by hiring non-EU migrants. Looking ahead, the government’s post-Brexit immigration policy must demonstrate similar levels of flexibility, to ensure that such shortage occupations benefit from a more generous minimum salary threshold.
“However, the alarm bell is sounding for employers trying to fill low-skill roles, many of [which] are still in wait and see mode. It’s essential that those employers are prepared for reduced numbers of candidates and further restrictions to low-skill labour planned from 2021 with a workforce plan.”
The key factors behind increasing basic pay by 2% or more include inflation (43%), the going rate of pay elsewhere (37%), recruitment and retention pressures (29%) and affordability (25%).
Employers that expect average basic pay at their organisation to rise by less than 2%, or not at all, cite restraint on public sector pay (41%) and affordability (38%) as their key reasons. Other factors include absorbing labour costs, such as the national living wage and auto-enrolment into pension schemes (20%), uncertainty about future access to the EU market (18%) and the going rate of pay at other organisations (12%).
Alex Fleming, country head and president of staffing and solutions at the Adecco Group UK and Ireland, added: “In our tightening labour market, ensuring businesses have the right supply of talent isn’t a new issue, and during these uncertain times, the ‘grow your own’ mentality has become more important than ever for organisations. Workforce planning comes into play again as organisations need to be constantly looking forward and anticipating their future needs and training their own talent accordingly.
“Planning ahead for workforce strategies is a long-term solution that now needs to be addressed more urgently than ever, so the labour market can thrive with the right talent in place.
“Conversely, in the shorter-term, imaginative recruitment strategies are also needed to find the right kind of skillsets to bring into organisations, for example unlocking hidden pools of talent can hold considerable value for employers and should be seriously considered as an important source.”
