Financial News

  • 12 August 2014, 11:14

Starting Pay Flatlines As Wage Outlook Weak

Wage growth in the UK is expected to remain weak after a new report showed only 2% of employers gave new recruits pay rises above inflation last year.

A survey by the Chartered Institute of Personnel and Development (CIPD) revealed that despite increasing output and a pick-up in the jobs market, the squeeze on real wages will continue.

In the year to June, the CIPD said that private sector median wage increases dropped to 2%, down from 2.5% in 2013.

Of the 1,000 employers it surveyed, only 20 said they had significantly increased starting salaries.

It comes as some reports have suggested a brighter outlook for wage growth.

Last month the Institute of Directors said two-thirds of the company bosses it surveyed intended to increase staff pay at least in line with inflation over the next 12 months.

But the CIPD said some surveys have failed to include a large number of employers who are not carrying out pay reviews or are implementing pay freezes. 

It found that only 38% of employers had carried out a pay review since the start of 2014, a figure it said was "surprisingly low" since most pay settlements take place during the first half of the year.

According to the Office for National Statistics, regular employee pay rose by 0.7% in the three months to May.

It was less than half the rate of inflation and the slowest pay growth since records began in 2001.

Despite its findings, the CIPD said the jobs market is growing.

CIPD chief economist Mark Beatson said: "Recruitment intentions are high, SMEs provide much of the fuel and we are seeing this all over the UK, with employers in the Midlands and the North having the highest short-term employment optimism.

"This is great news for job seekers, but we urgently need to see jobs growth accompanied by productivity growth for workers to feel the benefits of the recovery too."

He added: "The figures show that despite pay squeezes, around two thirds of employers plan to recruit employees in the next three months.

"Recruitment intentions in the public sector have risen to a five-year high with 75% indicating that they plan to recruit in the third quarter of 2014."

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