UK employees can expect lower pay rises as employers scale back hiring plans for 2024, with a growing pay gap between private and public sector workers.
Employees in the UK could face a drop in pay rises this year as employers scale back their hiring plans, according to a new report from the Chartered Institute of Personnel and Development (CIPD).
The findings come from a survey conducted last month, which included 2,006 employers and focused on their approaches to pay, staffing levels and job vacancies.
After remaining at 5% for some time, expected base salary increases fell to 4%, marking the first decline since the start of the Covid-19 pandemic.
In the private sector, the average expected increase in base pay fell from 5% to 4% in the latest quarter, while in the public sector expectations fell further, from 5% to 3%.
“We have seen a prolonged period of high wage growth in response to a tight labor market and high inflation that has pushed up the cost of living. Wage growth has helped people, but leaves employers with a burden higher wage to cover,” said Jon Boys, senior labor market economist at the CIPD.
“To see a sustained return to growth, we need to really focus on increasing productivity by investing in skills and technology in the workplace.”
As regards staffing, the picture is different between the public and private sectors. A third (33%) of private sector employers plan to increase overall staffing levels over the next three months, while one in 10 (10%) plan to reduce overall staffing levels.
However, in the public sector, almost one in five employers (18%) plan to reduce staff over the same period.
A significant number of employers (38%) are still struggling to fill job vacancies, and one in five expect significant difficulty in filling roles over the next six months.
“It feels like a key moment in the UK jobs market,” Boys explained. “The gap in pay expectations between the public and private sectors is widening again, at a time of growing pressure on public services.
“Investing in skills and training, managing people and increasing productivity will be key to helping organizations become future-proof and be better able to withstand economic headwinds when they arise.”