In a revealing turn of events, the UK workforce is set to experience smaller pay rises this year, as indicated by a recent report from the professional body for human resources, the Chartered Institute of Personnel and Development (CIPD). This adjustment comes at a time when employers are scaling back on hiring plans despite a surge in business confidence, primarily fuelled by the robust performance of the services sector.
The CIPD’s regular labour market outlook, a critical tool in gauging employer expectations for the year ahead, highlights a conservative approach to salary increases, marking the most modest projections since the pandemic’s onset. This shift occurs amidst a backdrop of heightened business optimism, as reported by the accounting firm BDO, which noted that output in the services sector had reached its pinnacle since July 2022.
Notably, the inclination among employers to expand their workforce has seen a decline, diverging from the trends observed in previous quarters. The CIPD report underscores a potential easing in the labour market’s tightness, potentially diminishing workers’ leverage in salary negotiations. The expected average pay rise is set to decrease from 5% to 4% this year, a first since the pandemic began, reflecting a cautious stance from employers across both private and public sectors.
The private sector, in particular, has witnessed a reduction in median salary increases from 5% to 4% over the past quarter, with the public sector encountering even starker adjustments, from 5% to 3%. This recalibration suggests a strategic shift from employers who, in the face of challenging recruitment for hard-to-fill roles, are no longer willing to compromise on profitability by absorbing additional costs. Instead, there’s a discernible slowdown in hiring plans, with a third of employers looking to bolster their staff levels in the coming three months, contrasted by a tenth who anticipate a reduction.
This net positive difference in staffing intentions, albeit reduced, signals a nuanced approach to workforce management, with public sector entities more inclined towards job cuts. Jon Boys, a senior labour market economist for the CIPD, remarked on the widening gap in pay expectations between the public and private sectors, accentuating the pressures on public services and the shift in employer focus towards sustainability and growth at the expense of headcount in certain areas.
Complementing the CIPD’s findings, BDO’s January report on UK business output echoes the resilience of the services sector, albeit with a concordant view on employment prospects, marking a continuous decline in hiring intentions for the seventh consecutive month.
The Workers Union Says…
“This juncture represents a pivotal moment for the UK workers and the labour market, with implications for both the public and private sectors. As employers recalibrate their strategies in the face of economic uncertainties and shifting priorities, the workforce must stay informed and adaptable. The Workers Union remains committed to supporting our members through these changes, advocating for fair treatment and ensuring that the voices of the workforce are heard and respected in this evolving landscape.”