Employers to offer below-inflation pay deals

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Private sector employees will receive pay awards averaging just 2.5% over the coming year, according to research published today by XpertHR.

The survey of 286 private companies employing a combined 800,000 staff found that half of all pay awards would be between 2% and 3%, with just 16% likely to be at or above the predicted 3.6% level of retail prices index inflation.

Just 5% of pay increases are likely to be worth 5% or more, the research found, while 11% of companies intend to freeze pay altogether.

The results mean that, in practice, the majority of employees will face another year of real-term pay cuts, adding to the pressure that HR departments face in motivating and engaging staff.

XpertHR pay and benefits editor Sheila Attwood said: “Pay award levels have been subdued for several years now, and although a median pay increase of 2.5% in 2012 is above the levels we are currently seeing, it is still well below pre-recession levels and inflation.

“October is the most common month for setting the pay review budget, so employees can only hope that their employer is looking at the latest inflation figures, rather than the forecast falls in early 2012.”

The overriding factor in deciding whether or not to offer employees an increased pay settlement was the company’s ability to pay, the survey found. Other factors coming into consideration included the inability to pass on higher costs to consumers, the introduction of compulsory pensions and company performance.

Employers most likely to offer higher pay awards were found in the chemicals, engineering and utilities sectors, while retailers, charities and construction firms were more likely to offer lower – if any – increases.

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