Interest rate rise casts shadow over pay negotiations

As
interests rates rise again, employers will need to keep a tight grip on pay
according to the Chartered Institute of Personnel and Development (CIPD).

John
Philpott, chief economist at the CIPD, said the Monetary Policy Committee’s
decision to raise interest rates by 0.25 per cent has created a tricky
background for pay bargaining in the next few months.

“While
this demonstrates to employers the importance of keeping firm control of wage
costs, staff will be seeking pay rises to compensate for the higher cost of
borrowing and mortgages,” he said.

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“With
the labour market getting ever tighter, and recruitment and retention pressures
mounting, the temptation will be to concede to higher pay to meet higher cost
of living claims despite the fact that the Consumer Prices Index, which
excludes housing costs, remains low,” Philpott said.

By Michael Millar