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UK firms expect to give 2.5 percent basic pay rise this year

Staff Writer |
Survey results show that private-sector employers expect to give employees a 2.5% pay rise over the coming year.

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This is unchanged on the figure recorded for 2018 as a whole, suggesting that Brexit uncertainty and affordability issues are balanced by record high employment levels when it comes to making pay awards.

Key findings include the following:

• Employers in both the manufacturing and production, and services arms of the private sector foresee 2.5% as their benchmark pay award this year.
• Overall the middle half of all pay awards are expected to be worth between 2% and 3%.
• The most common pay award predictions are 2% (28.7% of forecasts are at this level) and 3% (19.1%).
• At the top end of the scale, almost one pay award in 10 is forecast to be worth 4% or more.

Although the majority of employers are not planning to increase the level of their pay award, our findings do show that most employees can expect a pay rise.

Just 4.4% are predicted a pay freeze, although some will have to wait until beyond their normal review date as a number of employers are delaying a decision until the impact of Brexit on their business can be fully assessed.

Pressure to make higher pay awards is coming from familiar places - what other organisations are paying, recruitment and retention issues, and inflation. Meanwhile downward pressures stem from affordability, Brexit and pensions costs.

While pay rises may be on the cards for many, more than half (55.3%) of employers are taking steps to control their paybill costs. Some savings are expected from resourcing, with leavers not being replaced (cited by 25% of organisations) or redundancies (14.4%).

Direct financial savings are most likely to come from reducing overtime or overtime payments (16.3%) and awarding a lower pay rise than normal (13.3%).

Looking back, in the three months to the end of February 2019 XpertHR has recorded a 2.5% median basic pay award across the economy. Based on a sample of 148 basic pay awards effective between 1 December 2018 and 28 February 2019, we find that:

• The median pay award across the whole economy is 2.5%, with the middle half of pay awards (the interquartile range) worth between 2.1% and 3%.

• A slim majority (36.5%) of pay awards among a matched sample are higher than the same groups of employees received a year ago. A similar proportion are lower (30.7%) as are the same (32.8%).

• Within the private sector, the 2.5% figure is also recorded for pay awards in manufacturing-and-production firms, while private-sector-services employers report a median 2.7% increase.

Over the 12 months to the end of February 2019, the median pay award in the private sector is 2.5%, compared with 2% in the public sector.

XpertHR pay and benefits editor Sheila Attwood said: “This time last year we were heralding the increase in the XpertHR headline measure of pay awards from 2% to 2.5%. Based on the pay activities of employers so far this year and the increases planned, 2.5% looks set to be the benchmark pay award across the economy for 2019.”

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