A cautious approach to hiring and low pay awards are the “new normal”, with median wage rises across the economy expected to continue at around 2.8% over the coming quarter.
According to a survey of 319 UK employers conducted by the CBI and recruitment consultancy, Harvey Nash, pay restraint appears to remain the norm, with nearly half of those questioned planning a below-inflation pay award or only targeted wage increases.
A fifth of those questioned said that they intended to implement a pay freeze, however.
The CBI’s director general, John Cridland, said: “Hiring plans are cautious and pay awards, in particular, remain low as businesses look to make sure they stay competitive in tumultuous times. We have to accept this constraint as the new normal.”
It was particularly important for both government and employers to focus on the issue of youth unemployment, but about half of firms said that the ‘Youth Contract’ would persuade them to take a chance on hiring a young person compared with 20% that remained unsure, he said.
The problem was that 49% of survey respondents felt that young people lacked the skills that they required, while 37% said that they lacked aptitude, Cridland said.
Nonetheless, he pointed out that, across all age groups, some 30% of employers expected to take on new personnel over the year ahead compared with 18% who predicted staff cuts.
The findings of the Spring CBI/Harvey Nash Employment Trends Survey were reflected in the latest figures from Income Data Services. They indicated that 48% of private sector pay deals were at or above a median of 3% in the three months to the end of April, a fall from 58% in the previous month.
The figure dropped to 2.8% if public sector settlements were included due to another round of pay freezes that took effect in April, however. As a result, the number of pay freezes rose from 8% of total awards to a huge 20% in May, some two thirds of which were experienced in the public and third sectors.
