One employer in six says pensions auto-enrolment will restrain pay

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More than one-sixth (17.5%) of employers in the private and voluntary sectors believe that the cost of pensions auto-enrolment will place limits on the pay awards that they offer to employees in the coming year.

This is according to XpertHR’s pay forecast, which also found that a quarter (23%) of organisations think that general pensions costs will have a downward influence on pay awards in the year to the end of February 2013.

The introduction of pensions auto-enrolment means that employers must automatically enrol all eligible employees into a qualifying workplace pension scheme and make mandatory contributions. The date on which employers will need to begin auto-enrolment depends on their size, with the largest employers doing so from 1 October 2012.

Overall, pay awards for the private sector are expected to remain subdued, with employers predicting a median pay rise of 2%. Just 10% of the 259 employers surveyed expect to give an award that exceeds the 2012 retail prices index inflation forecast of 3.2%.

Despite several years of low pay rises and pay freezes, only 17% of organisations said that they felt under pressure to compensate employees for this in coming pay awards, with three-quarters (76%) believing that employees had accepted the need for pay restraint.

Sheila Attwood, pay and benefits editor at XpertHR, commented: “Although we might expect employees to be tiring of low pay rises or pay freezes, our survey respondents indicate that, to date, they have understood about the economic challenges that organisations face. However, a median 2% increase during 2012 will result in another year of below-inflation pay rises.”

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