The CIPD has revealed 5% pay increase intentions for UK private sector

The CIPD released its Labour Market Outlook: Autumn 2022 (LMO) report on 14 November 2022, and stated: “The median expected basic pay increase stands at 4 per cent in total. Expected pay awards in the private sector have risen to a median of 5 per cent, which is the highest of any sector recorded by the LMO since 2012.”

The CIPD’s LMO includes insights on wages, job vacancies, recruitment, and redundancies in the UK market.

According to the LMO, 38 per cent of employers are planning to increase their wages in the next 12 months, by a median of 4 per cent. Thirty-seven per cent aren’t sure about pay changes, 18 per cent don’t know, 6 per cent will halt increases, and 1 per cent plan to decrease pay.

As recently reported by HR Leader, Mercer says Australian wages are expected to rise by an average of 3 per cent.

CIPD labour market economist, Jonathan Boys, said: “Naturally the difficulty in securing talent is feeding into pay. This is perhaps the biggest story of this report, but it is a story of two halves. On the one hand, we are seeing the highest expected pay awards since the LMO’s current time series began in 2012. The private sector is expecting a median basic pay increase of 5 per cent. However, with CPI inflation currently running at 10.1 per cent in the year to September, most people are facing real terms pay cut.

“As a result, the cost-of-living crisis is one of the biggest challenges facing the HR profession today, which is why we’ve included a focus section on the cost of living in this quarter’s questionnaire,” said Mr Boys.

According to the CIPD’s LMO, 46 per cent of organisations are finding it tricky to fill their vacancies. The top three most affected markets are transport and storage, voluntary, and healthcare, at 60, 56, and 55 per cent, respectively.

For Australia, Mercer listed the hardest to fill jobs as IT, engineering, science, sales, marketing, and project management.

Mr Boys commented: “With every new release of data, we are looking to see if the jobs boom has peaked. This quarter’s LMO suggests the answer is no. Employers plan to increase headcount in the three months until the end of December. Securing enough talent remains a pressing concern for the profession.”

Fifty-six per cent of LMO respondents who have hard-to-fill open roles, believe the difficult vacancies will increase over the next month (from the report date), while 36 per cent of these employers think these roles will go down. Solutions for difficult job vacancies varied, with 44 per cent planning to upskill current employees to ease pressure. Twenty-six per cent plan to add to current workers’ duties, while just less than a quarter are considering raising wages.

Mr Boys continued: “The UK will likely enter a downturn soon, at which point we can expect the net employment balance to fall, perhaps turning negative. This will present a new set of challenges to employers. However, many labour market indicators, including unemployment, are lagging indicators. This means that they will start to change after the downturn hits. With this in mind, it could be some time before recruitment and retention pressures ease.”

The LMO noted that redundancies remain low but are on the rise. Sixteen per cent of employers plan to make redundancies before around Christmas, up 3 percentage points from the last quarter.

However, the report recognised recruitment is still higher than pre COVID-19. Sixty-nine per cent of respondents are planning to recruit new talent in the next quarter. Intentions to recruit across the sectors, in percentages: public (80), voluntary (74), and private (66).