Private sector employers are showing “cautious optimism” towards pay rises, according to XpertHR’s annual review of pay trends and prospects.
Directors are predicting pay rises of 2% in 2011, up from the benchmark pay award of 1.2% in 2010.
Employers are also more optimistic about pay freezes, with just 9.2% of pay awards expected to be frozen next year, compared with 30.6% this year.
Understandably, employers identified the current economic climate as a key influence in deciding pay decisions over the next year, with businesses believing that the main pressures on pay rises will be company performance and an inability to raise prices.
Eight in 10 companies were found to use retail prices index (RPI) inflation as a yardstick for pay setting.
Sheila Attwood, XpertHR pay and benefits editor, said: “Private sector employees are cautious about the prospects for pay rises in the coming year. With RPI at 4.6%, employees can expect to receive a real-terms pay cut as employers will be unable to match the increase in prices in pay packets.”
Although the majority (81.8%) of private sector employers used the RPI measure of inflation as a guide when setting the value of pay rises, there is growing interest in the Government’s targeted measure of consumer prices index inflation, with four in 10 companies planning to refer to this measure when setting pay.
XpertHR surveyed 296 private sector companies.