The Chartered Institute of Personnel and Development (CIPD) has raised concerns as pay settlement expectations in the UK are set to fall for the remainder of 2024.
The latest CIPD Labour Market Outlook reveals a shift in employer expectations on future wage increases, marking the first decline in pay settlement since the onset of the pandemic. After remaining stable at 5% for over a year, the median expected basic pay increase for the next 12 months has dropped to 4%, according to the CIPD report. This decrease is more pronounced in the private sector, falling from 5% to 4%, while the public sector experiences a sharper decline from 5% to 3%.
Workforce Planning and Hiring Intentions
The CIPD’s report also indicates changes in workforce planning and hiring intentions. A net employment balance, measuring the difference between employers planning to increase and decrease staff levels, has fallen from +26 to +22, the lowest level since Winter 2020/21. In the public sector, this balance has notably dropped to +6.
Despite this, recruitment intentions remain robust, with 67% of employers planning to recruit in the next three months. However, a significant number of employers (38%) report having hard-to-fill vacancies, a challenge more pronounced in the public sector (51%).
Challenges and Response to the Cost-of-Living Crisis
The survey reveals challenges in response to the ongoing cost-of-living crisis, with 66% of workers stating that their workplace lacks anti-discrimination or anti-harassment policies. Additionally, 75% report the absence of training sessions to combat bias and teach professional conduct.
In light of these findings, the CIPD underscores the importance of organisations investing in workforce development and technology. The aim is to address skills gaps, improve productivity, and facilitate sustained growth, providing an alternative to traditional training methods.
Jon Boys, senior labour market economist for the CIPD, emphasises the need for a focus on productivity through investments in workplace skills and technology. As pay growth has contributed to a higher wage bill for employers, he suggests that communicating wider benefits packages and improving job quality can compensate for reduced base pay increases.
Looking Ahead and Workforce Investment
The CIPD sees this as a pivotal moment in the UK labour market, with attention shifting from helping staff cope with the cost-of-living crisis to ensuring business sustainability and growth. Boys stresses the importance of viewing the workforce as a key driver of productivity, profitability, and value for organisations. Investing in skills, training, people management, and productivity gains is deemed fundamental for organisations to become future-proof.
This latest Labour Market Outlook report, based on a survey of 2,006 employers in January 2024, provides insights into pay expectations, staffing levels, and vacancy challenges, offering a comprehensive view of the evolving employment landscape in the UK.
