U.K. employers plan to raise pay by more than expected over coming year: Survey

Demand for labour growing while supply remains weak, says analyst
|payroll-reporter.com|Last Updated: 05/15/2018
Royal Wedding
Commemorative items are seen for sale ahead of the forthcoming wedding of Britain's Prince Harry and his fiancee Meghan Markle, on Oxford Street in London, May 11. REUTERS/Toby Melville

LONDON (Reuters) — British employers plan to offer bigger pay rises to staff over the next year than they expected three months ago, reflecting faster pay growth in the public sector as well as more general demand for staff, an industry survey showed on Monday.

The Chartered Institute of Personnel and Development (CIPD) said employers on average planned to raise basic pay for staff by 2.1 per cent at their next annual pay settlement, compared with 1.8 per cent three months ago.

The CIPD data fit with a broad pattern of labour shortages and gradually rising pay shown in other surveys and official data, which lie behind the Bank of England's view that it will need to gradually raise interest rates over the coming years.

This positive employment picture contrasts with the economy as a whole in the first three months of 2018, which grew at its weakest annual rate in five years, prompting the BoE to defer a previously widely expected rate rise in May.

Gerwyn Davies, senior labour market analyst for the CIPD, said employer optimism about job prospects meant that those weak provisional GDP figures should not be put under "too pessimistic interpretation."

Demand for labour continued to grow in the second quarter of 2018, and was not matched by supply, Davies added.

"This may explain why wage pressures are starting to increase following a prolonged period of relatively subdued pay growth. It could well be that employers are using higher starting salaries to attract the talent they need," he said.

Median pay awards over the past 12 months were two per cent, according to the CIPD's data.

Last month pay data company XpertHR said average pay settlements in the first three months of 2018 rose to 2.5 per cent, their joint highest since 2008.

Pay growth according to the CIPD's measure — which covers existing staff, and does not capture the effect of promotions or staff moving to better paid jobs — is lower than official data that shows average weekly earnings rose by 2.8 per cent year-on-year in the three months to February.

The unemployment rate fell to its lowest since 1975 over the same period, dropping to 4.2 per cent.

Almost one in three employers surveyed by the CIPD said they were raising wages to tackle their recruitment struggles, and the proportion of public-sector employers expecting to raise pay by two percent or more rose to almost two in five.

In March, trade unions and public-sector employers agreed a 6.5 per cent pay rise over three years for more than a million nurses and hospital staff.

The CIPD data was based on a survey of several hundred employers between March 9 and March 30.

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