Workers warned pay rises are set to slow as SMEs navigate economic uncertainty

UK staff should expect a slow in pay rises this year as employers navigate economic uncertainty, according to the Chartered Institute of Personnel and Development (CIPD).

Despite improved business confidence, employers are planning to give the lowest pay rise increase since the pandemic, falling from an average pay increase of 5 per cent to a predicted 4 per cent this year.

After holding at 5 per cent for over a year, this year is expected to be the first decline since the start of the pandemic.

The CIPD also highlighted a contrast between private and public sector wage rises, as the media increase of the public sector is predicted to fall from 5 per cent to 3 per cent.

Derek Mackenzie, CEO of Investigo, part of The IN Group, said, “When it comes to employment, pay is naturally going to play a central role for every member of staff, and organisations should understand the impact that pay rises, starting salaries and bonuses can have on recruiting and retaining staff. But there is much more to a role than pay alone.”

“In order to stand out from other employers, organisations must offer aspects such as career progression, flexible workplace policies, training programmes, a supporting culture, career mentoring and other factors to make staff feel welcomed and valued, consequently both attracting and retaining employees.

“When it comes to training, for example, staff want to better themselves to enhance their own skills and make themselves more valuable both inside and outside of their role, so support through access and guidance to training schemes can be a key differentiator in the job market.”

“Organisations must continue to prioritise their employees through times of economic turbulence, unlocking the power of people so that both businesses and staff can thrive.”

The figures coincide with employers also limiting the number of planned hires compared to previous quarters. CIPD expect the strain in the labour market to ease as competition for staff reduces.

One-third of employers plan to increase the number of staff over the next three months, while 10 per cent are set to decrease their headcount.

Elizabeth Anderson, CEO of the Digital Poverty Alliance, said, “During times of economic uncertainty, it is important to ensure that more people don’t fall victim to the digital divide as they fight with rising inflation against broadband and essential devices such as laptops.

“As many as 19 million people across the UK are already suffering from digital poverty, through a lack of access to connectivity, devices and digital skills, and with pay growth stalling, that number could be on the rise.

“In our increasingly digital world, government and employers must ensure their staff are properly equipped both in their home life as well as their job, otherwise, we risk millions more being forced to make cuts and, ultimately, going offline.”