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Employer struggle to pay in line with inflation

Employers are continuing to struggle to fund wages that keep pace with inflation, research has suggests.

Research from the Chartered Institute of Personnel and Development (CIPD) argues that despite the drop in inflation, employers will continue to struggle to close the gap between basic salaries and the cost of living.

The prediction is based on the CIPD’s Labour Market Outlook survey of more than 1,000 employers, which shows that pay award expectations for the next 12 months have fallen to 1.5% from 1.7%, compared with three months ago.

Public sector organisations’ predictions of average basic pay awards of 0.3% will continue to lag behind those organisations in the private (2.2%) and voluntary sectors (1.7%).

Due to continued economic uncertainty, 51% of companies surveyed remain unable to predict whether salaries will rise or not over the next 12 months, mostly suggesting any decisions will depend on organisational performance at the time.

Private sector services firms remain most uncertain about the next pay decision, with manufacturing and production being less cautious.

Among those companies that have been able to forecast a pay rise, the average award is below inflation at 2.6% and the main causes for the expected increase are affordability (62%), inflation (55%) and employee productivity and performance (52%).

Charles Cotton, rewards advisor at the CIPD, comments: “Our data shows that many employers are keen to raise pay in line with inflation but are struggling to close the gap as inflation remains stubbornly high.

“Line managers and HR professionals need to look at how they can continue to keep employees engaged and performing well in the absence of substantial pay rises, while at the same time limiting the impact of financial distress on employees by offering financial education, debt counselling and voluntary benefits packages.”

This was posted in Bdaily's Members' News section by Tom Keighley .