The return of the annual pay rise?

Employers need to be prepared to increase employee earnings in 2018 according to the Bank of England. What might it mean for you?

For much of my career pay rises have outstripped inflation but in recent years the trend has been quite the opposite. Pay freezes, unknown at one time, have been common in the last decade. There are several reasons why we might see a change this year:

  • The National Living Wage is set to increase in April to £7.83.
  • This year, hourly rates for workers below the age of 25, are also set to increase with a 4.7% rise for 18-20 year olds and 5.4% for 21-24 year olds.
  • These increases (significantly above inflation) will reduce differentials for adults, seniors, supervisors and even managers unless those positions receive similar increases. That could create pressure on earning levels.
  • National companies envisage significant pay rises. Last year, Tesco announced an increase of 10.5% over two years for hourly paid shop workers.
  • The Bank of England may raise interest rates as early as May, according to some commentators. This can put pressure on those with mortgages and in turn on pay.

Against this background employees are much more likely to press for pay increases or to move to employers where pay has already been increased.

Employers need to keep an eye on rates in the labour marketplace and budget for possible increases in pay.

Google provides access to significant amounts of information on the going rate for pay increases Some of our clients ask Employer Solutions to do such research on their behalf. Staff may be more accepting or trusting of independently researched data.

Malcolm Martin FCIPD

Author Human Resource Practice.

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