25th May 2016
Don’t expect a pay rise until 2020. Seriously.
According to the Charted Institute of Personnel and Development (CIPD), the current job-rich, pay-poor economy will last until the end of the decade.
Employees are unlikely to see much of a boost to the real value of their pay, according to the latest Labour Market Outlook. The survey of over 1,000 employers highlights a number of factors that are keeping pay growth in the slow lane in spite of the increase in hiring. The survey found that employers expecting to offer pay rises in the next 12 months will only award an increase of 1.7%.
The CIPD survey found that “low inflation, expanding labour supply, and the lack of productivity growth working in combination to reduce the economic pressure for employers to pay their staff more.”
Employers are also blaming the recent legislative changes that have been rocking the payroll world. The National Living Wage and the recent apprenticeship levies have had a huge impact on the bottom lines of businesses across the country, causing them to tighten their belts and reduce benefits and pay rises.
Mark Beatson, CIPD Chief Economist said: “These findings show that employers remain confident about short-term job prospects, with many more expecting to take on new staff than expecting to shed staff as the UK ‘jobs miracle’ continues. For now, there’s no sign of the economy running out of jobs, or out of people to fill those jobs. However, the UK is now in its eighth year of productivity ‘go-slow’ which continues to limit the scope for employers to pay more and recruitment and retention problems have so far proved manageable without across-the-board pay rises. This survey provides no indication of this situation changing any time soon.”
The CIPD have concerns that many businesses lack the knowledge and expertise to respond to the economic pressures and are stuck in a loops of low ambition, bad training and low investment. Small businesses are particularly at risk and need support from expert third parties in the running of business infrastructure and management. By outsourcing challenging business responsibilities, businesses can increase efficiency and free up capital for investment and growth. Even larger businesses are at risk from inefficient and outmoded departments that would benefit from streamlining.
Without productivity improvements, organisations will be forced to keep pay budgets under ever tighter control. It is essential that businesses look for more ways to save money and streamline their internal processes.