Pay rises in the UK are predicted to slow as businesses face economic challenges. This trend, outlined by the CIPD, reflects a cautious approach by employers despite growing business confidence.
- Average pay increases forecast to drop from 5% to 4%, marking first decline post-pandemic.
- Public sector wage rise predictions fall from 5% to 3%, highlighting sector contrasts.
- Employers plan fewer hires, anticipating less competition for staff in the labour market.
- Calls for strategies beyond pay to attract talent amid stalling wage growth.
Pay rises for UK employees are expected to decelerate, as indicated by the Chartered Institute of Personnel and Development (CIPD). Despite an optimistic business outlook, employers are projected to offer the smallest increase in wages since the pandemic era, reducing the average hike from 5% to 4% this year. This year marks the first contraction in pay increases following several years of steady 5% rises.
A divergence between private and public sector wage growth has also been highlighted. In the public sector, pay rise projections are set to decrease significantly, from 5% to a mere 3%, starkly contrasting with private sector trends.
Derek Mackenzie, CEO of Investigo, emphasised the crucial role of pay in employment, yet advised that organisations need to offer more than just competitive salaries. According to Mackenzie, aspects such as career advancement, flexible working arrangements, training opportunities, and a supportive workplace culture are essential to retain and attract employees. He stated, “There is much more to a role than pay alone.”
Alongside reduced pay rise projections, the current employment climate sees employers planning fewer new hires, reflecting expectations of a less strained labour market as competition for skilled workers diminishes. Current forecasts show that one-third of employers intend to increase their staffing levels over the ensuing three months, while 10% plan workforce reductions.
Amid these economic uncertainties, the issue of digital poverty resurfaces. Elizabeth Anderson, CEO of the Digital Poverty Alliance, warns of the potential rise in digital poverty due to stagnant pay growth and increasing inflation, affecting access to essential digital tools and connectivity. Anderson stressed the importance of adequate equipment for employees to thrive both professionally and personally in a digital-first world.
As economic tensions persist, organisations must innovate in employee engagement beyond traditional pay structures.
