Rise in pay for UK workers in 2015 set to beat inflation
Pay could finally surpass inflation next year, according to new research.
Every time new figures emerge showing that UK employment is rising, unions, businesses and consumers alike voice their concerns that pay is not picking up. Wages have risen below the rate of inflation for much of the period since the financial crisis, and they have a lot of catching up to do. Fortunately, new figures from human resources firm XpertHR show that wages may finally be due to start outpacing inflation in 2015.
The data shows that the average pay award is due to stay at a steady two per cent over the course of next year.
That may not represent a huge leap, considering that pre-recession pay increases tended to stand between 2.5 and 3.5 per cent. Moreover, it isn’t that different to the average pay increase throughout 2014.
However, the difference lies in the rate of inflation itself – as well as the measures of inflation being considered. In 2014, the retail prices index (RPI) stood at 2.4 per cent and it’s expected to stand around three per cent next year. But the latest figures from the Office for National Statistics (ONS) reveal that the headline consumer prices index (CPI) calculated inflation at 1.2 per cent in the year to September. What’s more, it’s also expected to remain low next year.
“Inflation is likely to run below two per cent throughout 2015. With utilities firms unlikely to raise prices this side of the election and the drag from sterling’s appreciation, inflation should remain subdued,” Berenberg bank economist and former Bank of England inflation forecaster Robert Wood told CityAM.
Just 5.4 per cent of respondents told XpertHR that their pay awards are specifically linked to inflation, so it’s unlikely that the cost of living is directly affecting the remuneration that workers are offered.
But with 34.3 per cent of organisations said that employee retention was their main reason for boosting pay, it’s becoming clear that companies know they will have to offer better incentives if they want to hold onto their talent.
With the economy picking up, workers are becoming more optimistic about their job prospects and seeking new opportunities elsewhere. If they want to retain talent, they will have to prove it on payday.