Basic pay expected to grow 1.8% in coming year

Pay rise-2015

Basic pay is expected to grow by 1.8% in the coming year, down from 2% in the previous quarter, according to research by the Chartered Institute of Personnel and Development (CIPD).

Its Labour market outlook: Spring 2015 report, which surveyed 1,000 UK employers, also found that the modest fall in pay expectations is most likely due to falling inflation.

The study also found:

  • The reasons cited by employers for not being able to meet the Bank of England’s inflation rate target of 2% in their pay awards are public sector pay restraint (41%) and affordability (32%). 
  • Private sector employers are more likely to cite reasons such as: having no recruitment or retention pressures (25%), the national minimum wage (20%) and the low rate of inflation or cost of living (15%).

Gerwyn Davies, labour market analyst at the CIPD, said: “The new government may be inheriting a strong labour market but people’s pay packets are only seeing very modest improvements, if at all.

”The ‘burning platform’ of widespread recruitment pressures that would have an impact on wages isn’t even smouldering yet. The proportion of people switching jobs remains well below pre-recession levels despite recent increases, while labour supply remains strong, especially from migrants, welfare claimants entering the labour market and older workers staying in work for longer. As a result, employers simply aren’t under pressure to increase salaries. 

”In addition, word has spread that inflation is expected to remain very low this year so it’s no surprise many employers are hitting the pause button on pay.

Low or no pay rises were essential options that kept many businesses afloat and people in work during the heights of the recession; yet somehow they’ve become the norm in the post-recovery world.

“Interestingly, we’re not seeing a massive backlash from employees on this; who seem content with the arrangement and happy just to be in work and receiving a regular wage; even if it isn’t as high as they would like. And very low inflation means that cost-of-living pressures are much less important than they were two or three years ago.

“It seems that ‘stable’ has become the new ‘ambition’ for both individuals and businesses, which could go some way to explaining the UK’s productivity woes.”