Public sector pay awards have overtaken private sector rises for the first time since Autumn 2020, according to the Chartered Institute of Personnel and Development (CIPD).
Its latest Labour market outlook showed that the public sector has gone from the sector with the lowest median pay awards (2.5%) to the highest (4%) in the course of just three months.
The next quarter will see even higher awards in the public sector of 5%, while in contrast, private sector awards are likely to be 3% over the next three months, and for the 12-month period. The public sector net employment balance, which measures employers’ expectations of increasing staff levels in the next three months, has risen from -1 to +6. The overall net employment balance, meanwhile, edged up from +18 to +21.
Private sector pay awards, in contrast, are likely to face “downward pressure” following the Budget announcements of increases to employers’ national insurance contributions and the national minimum wage.
Reflecting public sector confidence, the net employment score was highest in care, social work and other healthcare roles, at +47, followed by construction at +43.
Just over a third of employers reported hard-to-fill vacancies, with 42% in the public sector and 34% in the private sector.
The CIPD also looked at employers’ plans to hire from disadvantaged or under-represented groups. One in five (21%) of smaller employers said they were not planning to or unlikely to over the next three years, compared to large private sector or public sector employers.
Only 13% of small businesses in the private sector plan to hire people with a disability or long-term health condition in the next three years compared to 42% of larger private sector employers and 43% of public sector employers.
James Cockett, senior labour market economist at the CIPD, said: “This should help support the NHS and the delivery of other key public services in the shorter-term,” he said. However, improvements to people management capability and technology adoption will be needed to raise efficiency in the public sector to respond to rising demands on services and spending constraints over the longer-term. These increased business costs are likely to act as a barrier to growth and could lead to employers offering lower pay rises, being more cautious about investing in workers’ skills or taking on new staff.
“Raising productivity will be key. It’s crucial the government sets how it is planning to work with employers to improve productivity, wages and living standards across the economy through its forthcoming industrial strategy and through changes to key areas of policy such as skills, innovation and business support.”
