More than half (55%) of employers who are experiencing difficulties in retaining employees over the past 12 months have increased staff salaries, according to research by The Chartered Institute for Personnel and Development (CIPD) and The Adecco Group.
The Labour Market Outlook report, which surveyed 2,001 employers, also found that 30% of respondents struggling with staff retention in the past year have raised salaries for the majority of staff, compared to 25% who are only raising wages for key employees. Around 42% of respondents have not raised salaries at all despite rising retention difficulties.
The research also found:
- Employers’ median basic pay increase expectations in the 12 months up to June 2019 are 2% and the mean basic pay rise expectation has risen from 2.1% to 2.2% in the last three months.
- Employers’ median basic pay increase expectations in Scotland are 3%.
- 44% of respondents who are planning to make a pay decision in the next 12 months expect basic pay to increase at their organisation, compared to 8% of respondents who intend to freeze pay.
- 32% of respondents believe it is too hard to tell how pay will change in the next 12 months.
- 34% of respondents anticipate a basic pay increase of between 2% and 2.99%, and 22% of respondents plan to give a basic pay rise between 1% and 1.99% before June 2019.
- 16% of respondents predict basic pay to increase by between 3% and 3.99% before June 2019; 11% of respondents expect basic pay to rise by 4% or more.
- 47% of respondents cite inflation as a key factor behind their ability to at least match the Bank of England’s inflation rate target of 2% in their basic pay award. This compares to drivers such as the going rate of pay elsewhere (41%), the ability to pay more (30%), recruitment and retention pressures (26%), union and staff pressure (23%) and other labour costs (22%).
Gerwyn Davies (pictured), senior labour market analyst at the CIPD, said: “Despite the declining unemployment rate, it seems that the downward pressure of persistently weak productivity growth is dominating any upward pressure on pay from labour and skills shortages. The battle for productivity growth and higher wages in the UK will be won or lost in our workplaces.
“Poor skills development, skills mismatches, lack of [employee] autonomy and inadequate management all have a significant impact on people’s productivity at work, which affects organisational performance and employers’ ability to increase wages. To help address this ongoing challenge, the government needs to ensure its industrial strategy has a much greater emphasis on supporting improvements in leadership, people management capability and skills development, particularly through the provision of better support for small businesses at a sector and local level.”
Alex Fleming, country head and president of staffing and solutions at The Adecco Group UK and Ireland, added: “With Brexit looming we’re seeing a talent shortage and a more competitive marketplace. In this candidate-short landscape the pressure is on employers to not only offer an attractive salary, but also additional benefits.
“In today’s environment employment benefits such as healthcare, a strong pension, flexible working and a collaborative and empowering work culture give employers a strong competitive advantage in attracting the best talent. Retention also remains key; it is imperative that employers develop and promote their staff so they don’t fall short and feel the impact of the dwindling growth of the UK’s talent pool.”