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With the number of job vacancies continuing to outstrip the number of unemployed, despite an economic turndown, the survey of more than 2,000 employers by the Chartered Institute of Personnel Development (CIPD) found that expectations of median pay awards during 2023 had risen in the private sector to five per cent – the highest since the institute began the survey in 2012.

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Pay rises on the cards for half of UK employees?

The CIPD's latest Labour Market Outlook found that 55 per cent of companies said they expected to raise pay further in order to recruit and retain staff.Some 70 per cent said they planned to hire new staff in the next three months, although 57 per cent admitted they already had vacancies that were proving hard to fill. The survey found that the most common approaches to overcome hard-to-fill vacancies in the past six months had been to upskill existing staff (47 per cent), raise wages (43 per cent), increase the duties of existing staff (36 per cent), improve job quality (27 per cent) and hire more apprentices (26 per cent).

Boosting employer investment in training key

Jon Boys, senior labour market economist at the CIPD, said: “Skills and labour remain scarce in the face of a labour market which continues to be surprisingly buoyant given the economic backdrop of rising inflation and the associated cost-of-living crisis."While he said it was encouraging to see many employers taking steps to tackle skills shortages by upskilling existing staff and hiring apprentices, he added: "The UK government could provide much-needed support by making the Apprenticeship Levy more flexible, to boost employer investment in training and reverse the decline in apprenticeship starts we’ve seen in recent years.“Many employers are recognising the potential to attract certain groups to fill vacancies – particularly older workers, carers and those with health conditions – but this also requires a focus on improving job quality, particularly flexibility.“The forthcoming introduction of a day one right to request flexible working should prompt more employers to ensure that they advertise jobs as flexible and provide a range of flexible working practices to attract and retain a more diverse workforce. However more needs to be done to help provide employers, particularly SMEs, with access to occupational health services or support, to help them to keep our ageing workforce healthy and in work.”

Price rises for pay increases 'concerning'

Steve Herbert, wellbeing and benefits director at &Partners, told Personnel Today that while the hike in anticipated pay offers was “a much-needed increase for so many working households, it won’t fundamentally solve the cost-of-living crisis for employers and employees as it’s a real-terms decrease not an increase”.He added that inflation as measured by the Consumer Prices Index did not include increases in mortgage or rental costs, something that would put pressure on many families this year.“It’s worth pointing out that in real terms UK employees have not generally had a pay rise since the financial crisis of 2008,” Mr Herbert said.“The average household could just about absorb a one per cent decrease in earnings each year during this period, but this has left them increasingly financially exposed. As a result, there was very little financial padding to help employees absorb that sudden spike in inflation last year.”Mr Herbert added that it was “concerning” that more than half of employers planned to fund pay rises by increasing their prices.“This could then hard-wire inflation into the system,” he said. “That said, there is very little choice for employers here, as they too have been trying to absorb price rises and labour costs since the financial crisis, as well as the spike in energy costs last year.”The CIPD survey also found that employers appeared to be more receptive to the idea of hiring people returning to work after having time out of the labour market, for reasons other than having a child.

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