According to a survey released on Monday, British firms anticipate raising employee compensation by the greatest in at least 11 years, but the 5% pay increases would still be considerably behind anticipated inflation.
The Chartered Institute of Personnel Development (CIPD) reported that 55% of recruiters planned to raise base or variable pay this year as they struggle to hire and retain staff in Britain’s competitive labor market. The Bank of England is concerned that the inflation surge will be harder to control if pay deals keep rising.
Expected median annual pay awards for 2023 increased from 4% to 5%, the highest level since CIPD records began in 2012.
More than half of respondents said they had trouble filling positions, and almost one-third predicted they would have the same problems in the following six months.
According to Jon Boys, senior labour market economist at the CIPD, “skills and labor remain scarce in the face of a labour market which continues to be remarkably upbeat given the economic backdrop of growing inflation and the concomitant cost-of-living issue.”
The poll also revealed a widening of the salary expectation gap between employers in the public and private sectors. According to the CIPD, planned pay settlements in the public sector dropped from 3% in the previous quarter to 2%, while they increased to 5% in the private sector.
The outcomes underlined how living standards are being squeezed as important workers, such as nurses, teachers, and public transportation employees, stage a series of strikes over salary and working conditions.
Even while there are indications that the recent increase in inflation has subsided, BoE Governor Andrew Bailey highlighted concerns about wage setting last week.
After reaching a 41-year high of 11.1% in October, annual inflation decreased to 10.5% in December. Although the BoE increased interest rates this month to their highest level since 2008, Bailey said that inflationary pressures were still a cause for concern.
According to the quarterly study, employers were more likely to take on older workers and those with medical issues who were returning to the workforce.
Between January 3 and January 25, the CIPD polled 2,012 employers.