Wage rises coming back on the agenda

2014 may well see the re-emergence of the annual pay rise, which has largely been in hibernation since 2008.

Incomes Data Services report the number of pay freezes and minimal awards has already fallen to 6% compared to 36% in the last quarter of 2013. Pay awards of 3% and above have doubled to nearly a third of all settlements and many of these, it is noted, are in the care sector.

Further evidence comes from the Independent Low Pay Commission (LPC) now recommending a 3% rise in the National Minimum Wage to £6.50 p.h. Both the Chambers of Commerce and the CBI support this level of increase and the Government usually implements the LPC’s recommendation.

While these figures are pragmatic there are also more altruistic pressures on the horizon. In January George Osborne called for £7 p.h. rate and there are calls for a “Living Wage” which would be over £7 p.h.; a concept we examined here in November 2013.

There are also substantial real pressures on employees. If interest rates rise as unemployment falls this will put many more families into “debt peril” where they use more than half their income to pay debts. Where employees are represented by Trade Unions, particularly, we can expect these and other “living standard” arguments to be put forcefully.

In considering rises for their staff employers need to be mindful of the current median rise of 2.5% (half the rises are above this figure and half below) and some upward trend in this figure. Ignoring the need for a pay rise is no longer a realistic option. Irrespective of the enforced NMW (likely to be that 3%), retaining and recruiting staff will be influenced by wage rates in your geographical area.

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