One third of organisations in the UK plan to up staff pay next year, according to a study by Incomes Data Services (IDS).
More than half of employers are making the same settlement as last year and only 13%are planning a lower settlement, the survey suggested.
The cost of living will play a key role in shaping the pay expectations of workers, said IDS, as well as the "fragility" of the jobs market.
Most pay awards were higher this year, with pay freezes falling to the lowest levels since the end of 2008. Median pay rises this year were running at 2.5%, compared with 2% last year.
IDS said its survey included just three public sector settlements and all three resulted in pay freezes. In the private sector, workers in manufacturing got a better deal than their counterparts elsewhere in the economy, taking home a 2.8% rise, on average
Ken Mulkearn, editor of IDS Pay Report, says that the rising cost of living will make pay awards more important in maintaining employee morale. “Going into 2012, there are conflicting pressures on pay,” he warned.
“If the recession recedes, there may be pressure for higher awards, particularly at firms where increases were lower or zero before. Continued high inflation adds to this pressure. But the uncertain economic outlook, and the impact of public sector cuts on both the wider economy and the labour market will make for a tougher climate when it comes to decision-making on pay.
“At a time when the economic backdrop is challenging, ways of using reward to stimulate employees will gain in importance. While some firms may be able to award increases in line with inflation, most will have to be inventive in designing reward packages that achieve the aim of recruiting, retaining and motivating staff.”
