Private sector employers are expecting minimal pay increases in the near future, according to new research from XpertHR.

The survey questioned 127 private employers, employing 86,164 people, about their pay intentions for the 12 months to the end of February 2014. The median pay increase prediction for the next year was found to be 2.5 percent, taking into account both basic and performance-based pay. This figure fell to two percent when just basic pay increases were counted.

Other findings of the survey:

• 76.4 percent of firms will give their largest employee group a pay rise over the year to end of February 2014 – 11 percent plan a pay freeze
• Manufacturers forecast slightly higher pay increases (2.5 percent) than services sector organisations (2.3 percent)
• Inflation was cited as an upward influencer on pay awards by 55.9 percent of employers, ahead of recruitment and retention (49.6 percent) and affordability (48.8 percent). Affordability was also the biggest downward influence (40.2 percent) alongside an inability to increase prices (37.8 percent) and the costs of pension auto-enrolment.
• The most common basic pay rise planned is precisely two percent, with more than two-thirds (68 percent) of those employers able to specify a figure intending to pay one worth from two to three percent
• When questioned over their priorities over the next year, employers highlighted job evaluation, redundancies, reviewing benefits, reducing overtime costs and restructuring teams or job roles.

Many employees have come to expect pay increases and the lack of a ‘suitable’ salary rise may cause them to start looking elsewhere. If employers cannot afford pay rises then they should look at the possibilities of introducing cost-effective benefits to show employees appreciation without the associated financial costs of increasing salaries. Transparency is key, of course – if companies can’t afford to increase salaries they should make this clear to staff, otherwise they may just think the issue is being brushed under the carpet.

XpertHR Pay and Benefits editor Sheila Attwood said: "Employees look set to experience yet another year of anaemic pay rises. With two percent to 2.5 percent likely to be the going rate for the foreseeable future, inflation continues to outpace wage increases, with most employees seeing their pay fall behind in real terms."