CIPD warning | Employees told to expect smaller pay rises this year

Employers will need to balance tightening purse strings with employee expectations for higher pay as cost-of-living crisis continues, the CIPD warns.

Employers’ basic pay increase expectations over the next 12 months have fallen for the first time since Spring 2020, according to the latest CIPD Labour Market Outlook.

Having held steady at 5% for more than a year, UK employers expected basic pay increases for the year ahead have fallen to 4%, marking the first fall in pay expectations since the start of the pandemic. The median expected basic pay increase in the private sector has fallen from 5% to 4% since the last quarter while pay expectations in the public sector have fallen further from 5% to 3%.

The CIPD’s report also shows that fewer employers expect their workforce to grow than in previous quarters. Overall, a third (33%) of employers plan to increase their total staff level over the next three months while one in ten (10%) plan to decrease their overall staffing levels. However, many employers (38%) continue to report hard-to-fill vacancies and one in five respondents (21%) expect significant problems filling roles over the next six months.