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Future pay, mixed predictions

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There are signs of a positive shift in pay prospects for 2012, but uncertainty still prevails. The last quarter has seen pay intentions reach their highest level since spring 2009.

According to newly released data from survey of more than 1,000 employers, commissioned by the Chartered Institute of Personnel and Development (CIPD). The survey asked employers if they planned to increase, freeze or decrease pay in the 12 months to December 2012 and found that the expected mean basic pay settlement* was 1.7 percent, compared with 1.5 percent in the previous quarter and 1.3 percent at the same time last year.

In the private sector, 35 percent of employers predict a pay rise (unchanged from last quarter), with the average increase creeping up from 2.1 percent to 2.2 percent. Among those planning to increase pay, manufacturing and production firms are forecasting the highest rises (2.9 percent), followed by those in the service sector (2.7 percent). The replacement of a pay freeze with a one percent pay cap in the public sector has seen the proportion of employers forecasting a pay increase in this sector jump from 12 percent to 30percent, with average public sector pay increases jumping from 0.3 percent to 0.8 percent. On average, 16 percent of all employers predict a pay freeze for the coming year, but this ranges from 9 percent in the private sector to 40percent in the public sector.

Despite the upward movement in pay predictions, the survey also revealed that a level of uncertainty prevails amongst many employers, particularly in the private and voluntary sectors, with 55 percent and 56 percent respectively feeling unable to predict the outcome of their pay decision, as it is too early to say.

Charles Cotton, CIPD rewards adviser, comments: “While the predicted increases in pay settlements reflects a cautious optimism among members in the private sector that the worst may now be over, uncertainty about how fast the economy will improve is acting to moderate pay forecasts and leading many employers to hedge their bets on the outcome of the final decision. As we move further into the pay round and as organisations get a better idea of how well they and the economy are likely to perform, we should see fewer feeling unable to predict the outcome of their annual pay decisions.

“Across all sectors, and whatever pay decisions are predicted, it’s vital that employers maintain an honest line of communication with employees in order to keep staff motivated and engaged; previous CIPD research has shown that employees are satisfied with their employer’s pay decision if their employer has taken the time to explain the rationale behind that decision. The same research also showed that even among those employers that do talk to employees about the basis of their pay rise, few took the opportunity to explain to staff what needed to happen in the next 12 months for staff to get another increase.”

* This figure is the average across all firms surveyed, and therefore includes pay increases, freezes and decreases. It excludes bonuses, incremental increases, overtime and impact of regrading exercises.

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