Organisations optimistic about pay despite planning subdued awards for 2015

private-sector pay forecast

Pay awards for private-sector employees are predicted to be worth a median 2% during the coming year, according to new research on private-sector pay forecasts. This is the first year since 2009 that pay awards will rise above the rate of RPI inflation, which is currently 1.1%.

Awarding pay rises above the rate of inflation would historically be viewed as good news, but Sheila Attwood, XpertHR’s pay and benefits editor, told us: “This situation has arisen because inflation is unusually low rather than due to higher pay awards. Employees may be disappointed with a 2% rise given recent cries of economic optimism about wage growth and the fact many workers have had years of restricted pay growth, some since 2009.”

Research from XpertHR’s pay forecasts for the private sector shows that a median pay forecast of 2% applies to both private-sector services and manufacturing-and-production organisations, and mirrors the median pay rise awarded for the year to 28 February 2015.

Although the 2% predicted pay award is no higher than increases seen over the past year, organisations are optimistic about pay over the next 12 months. Almost two-thirds of organisations expect an increase in their paybill budget, and 44% of organisations do not expect to take any specific steps to control paybill costs in the coming year.

Survey respondents identified the factors that are likely to push pay awards up. The top four upward pressures on pay awards (all cited by approximately two-thirds of organisations) are: retention factors; pay levels in the same industry; the organisation’s performance/ability to pay; and recruitment factors.

The survey also found that two-thirds of organisations agree with the statement “employees will expect higher pay rises in the coming year”, suggesting that employees feel there is scope for their employer to make higher pay awards this year.

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