The last quarter of 2011 saw pay intentions in the United Kingdom reach their highest level since spring 2009, according to a survey of more than 1,000 employers commissioned by the Chartered Institute of Personnel and Development (CIPD).
When asked if they planned to increase, freeze or decrease pay in the 12 months to December 2012, employers predicted a mean basic pay settlement (includes pay increases, freezes and decreases; excludes bonuses, incremental increases, overtime) of 1.7 per cent, compared with 1.5 per cent in the previous quarter and 1.3 per cent at the same time last year.
In the private sector, 35 per cent of employers predicted a pay rise (unchanged from last quarter), with the average increase creeping up from 2.1 per cent to 2.2 per cent. Among those planning to increase pay, manufacturing and production firms are forecasting the highest rises (2.9 per cent), followed by those in the service sector (2.7 per cent), found CIPD.
The replacement of a pay freeze with a one per cent pay cap in the public sector has seen the proportion of employers forecasting a pay increase in this sector jump from 12 per cent to 30 per cent, with average public sector pay increases jumping from 0.3 per cent to 0.8 per cent. On average, 16 per cent of all employers predicted a pay freeze for the coming year, but this ranges from nine per cent in the private sector to 40 per cent in the public sector.
Despite the upward movement in pay predictions, uncertainty prevails amongst many employers, particularly in the private and voluntary sectors, with 55 per cent and 56 per cent respectively feeling unable to predict the outcome of their pay decision, as it is too early to say.
"While the predicted increases in pay settlements reflects a cautious optimism among members in the private sector that the worst may now be over, uncertainty about how fast the economy will improve is acting to moderate pay forecasts and leading many employers to hedge their bets on the outcome of the final decision,” said Charles Cotton, CIPD rewards adviser. “As we move further into the pay round and as organizations get a better idea of how well they and the economy are likely to perform, we should see fewer feeling unable to predict the outcome of their annual pay decisions.”
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