Employment Law Cases

Employers are reluctant to give inflation-busting wage rises in 2018 despite tightening labour market.

There is still only very limited pressure on employers to increase pay in the coming year - the median basic pay increase expected over the 12 months to December 2018 is 2%, according to the CIPD’s Labour Market Outlook, Winter 2017-18. This is despite signs that further labour market expansion is being constrained by a lack of supply of skilled and unskilled staff in some sectors, with about two-thirds of employers reporting they have vacancies which are difficult to fill.

As in previous LMO reports, median basic pay increase expectations are higher in the private sector (2%) than in the public (1%) and voluntary (1.5%) sectors. Median basic pay expectations in manufacturing and services are also 2%.

Among those employers that can estimate their next basic pay award, the LMO indicates that nearly a third (31%) of employers anticipate a basic pay increase of 2–2.99%, while over a quarter (26%) plan to give a basic pay increase of 1–1.99%. Additionally, close to a fifth of employers expect basic pay to increase by 3–3.99% (16%). Only 10% of employers anticipate basic pay rising by 4% or more in the 12 months to August 2018.

The CIPD’s data contrasts with a more optimistic prediction from the Bank of England which expects firms to increase pay by 3.1% in 2018. And early forecasts from XpertHR say that pay awards in 2018 are worth a median 2.5%, half a percentage point higher than the 2% median recorded by them in 2017, and the highest level they’ve recorded for almost four years.