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 UK employers are expecting to continue raising pay for staff as they battle to retain people, even as the economy is expected to stutter, according to a new survey.
Businesses expect to offer pay rises of up to 5% over the coming year, the highest level since 2012 and sustained from the last two quarters, according to the poll of 2,000 human resources executives by the Chartered Institute of Personnel and Development (CIPD), a professional body.
More employers also expect to try to retain staff who have said they want to leave with counteroffers – trying to beat offers from elsewhere with pay rises or other perks. Forty percent of UK employers have made a counteroffer in the past 12 months, the CIPD said. Thirty-eight percent of employers who made offers matched the salary of the new job offer and 40% offered even higher sums.
The findings suggest the UK labour market remains tight, with unemployment still near record lows of 4% in May, although it did increase more than expected from 3.8% in April.
The Bank of England has been raising interest rates steadily to try to reduce inflation, which has remained stubbornly high. That is expected to cause a slowdown in the UK economy which would likely lead to higher employment.
However, there has been little sign of major changes yet. Wage data on Tuesday is expected to show further increases.
Reuters reported that the BoE said on 3 August that pay growth had failed to slow, creating a risk of persistent high inflation and higher interest rates. "Growth in earnings excluding bonuses – which typically runs slightly higher than pay settlements – was an annual 7.3% in the three months to May. Data on Tuesday is forecast to show a further increase."
Employers make the most counteroffers in London (58% of London-based employers made one in the last 12 months). That makes it the “counteroffer capital” of the UK, the CIPD said.
Jon Boys, senior labour market economist for the CIPD, said: "Counteroffers may help to retain key staff and avoid knowledge drains and the cost to hire new people, but this must be weighed up against other considerations. For instance, counteroffers could exacerbate pay gaps, cause equal pay challenges, or result in a drop in employee engagement. They may also only work for the short term.
While pay is often the most typical focus of a counteroffer, there are other things employers should consider in making roles more attractive, such as flexible working, additional paid holiday, opportunities for career development, or better pension contributions.
In other news, European stock markets have dipped amid rumbling concerns over China’s economy.The FTSE 100 is down 0.1%, as are Germany’s Dax and the broad Europe Stoxx 600 index. France’s Cac 40 is down 0.2% at the open.
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