2017 pay rises set to be below rate of inflation


Employers in the private sector expect to offer pay rises of just 2% over the coming year – less than the rate of inflation, according to the latest data from XpertHR.  

The 2% forecast comes as retail prices index (RPI) inflation rose to 3.2% in February, a rise of 0.6% on January.

XpertHR’s data, based on responses from 212 organisations, suggests only 8.5% of pay rises over the next year will result in an increase to employees that is worth the same or more than the current rate of inflation.

Furthermore, with forecasters predicting continues rises in RPI through the year, this figure could be even lower if employers don’t revise their pay review plans.

Inflation was identified as the factor most likely to put upwards pressure on pay rises over the coming year, which XpertHR said suggests employers are aware of how a below-inflation pay award would be viewed by their employees.

With recruitment and retention issues prevailing, many employers are likely to have to use pay to secure the talent they need. However, in a hangover from the recession, many employers report they simply don’t have the ability to award higher pay awards.

On a more positive note, few employers are planning to freeze pay – just 4.4% of pay reviews are expected to result in no increase – but only a minority expect to offer higher rises than employees received last year. Instead, more than half (52%) of pay rises are likely to be at the same level as those offered a year ago. Just a third of this year’s pay awards are expected to be at a higher level than the affected employees received last year.

Sheila Attwood, XpertHR pay and benefits editor, said: “With RPI inflation rising, most employees are facing the prospect of a below-inflation pay award this year. Despite upwards pressures from a number of areas, employers are so far remaining cautious about their pay increases.”

Thursday, 23 March 2017

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