Subdued Pay Rise Of 2% Expected In The Year Ahead

Private sector employers are predicting pay awards of just 2% in the year to 28 February 2013, according to data from pay specialists XpertHR.

The slow economic recovery is continuing to influence organisations, with pay freezes and redundancies forecast by some, but a pay rise is on the cards for most employees. Our survey found:
More than three-quarters of respondents (76.1%) say they are planning to award a pay rise on the normal review date. Around a tenth of organisations are forecasting a pay freeze.

The median pay rise forecast for the private sector overall is 2% – but this rises to 2.5% when not-for-profit organisations are excluded.

Half of all organisations surveyed expect to award rises worth between 2% and 3%.

Employers in the manufacturing and production sector are forecasting a median 2.5% pay rise over the next year, compared with a 2% forecast by private sector services firms.

Only 9.9% of organisations expect to give an award worth more than 2012’s RPI forecast of 3.2%.

Approximately half (48.3%) of the organisations surveyed expect some change to other employee terms and conditions. Of those giving details, 34.4% expect to make at least some redundancies and a quarter will review their benefits.

Almost one-quarter (23.2%) of respondents say pension costs generally will be a downward influence on pay awards and 17.5% say pension costs due to the introduction of auto-enrolment are likely to restrain pay.
Employers do not feel under pressure to compensate for several years of low/zero pay rises – only 16.6% of organisations think the 2012 pay deal needs to makes up for previous low awards. Additionally, more than three-quarters (76.4%) of organisations feel that employees have accepted the need for pay restraint – this may be because organisations have ‘stuck together’, keeping in-line with competitors in terms of rates of pay.

The figure from our pay forecast survey is lower than our current median pay award of 2.6% for the three months to 29 February 2012, but organisations may be wary of committing to higher pay rises and some feel burdened by pension changes. Additionally, the not-for-profit sector, which tends to take its lead from the public sector in terms of pay awards, accounts for more than one-fifth of respondents to this survey.

XpertHR Pay and Benefits editor Sheila Attwood said: “Although we might expect employees to be tiring of low pay rises or pay freezes, our survey respondents indicate that to date they have understood about the economic challenges that organisations face. However, a median 2% increase during 2012 will result in another of year of below-inflation pay rises.”