UK employers plan 5% pay rises, many resort to counteroffers: CIPD

By David Milliken

LONDON (Reuters) – British employers expect to raise pay by 5% over the coming year and are increasingly making counteroffers to keep staff who are tempted by higher wages from rival firms, according to a survey which added to signs of inflationary heat in the job market.

The Chartered Institute of Personnel and Development (CIPD) said human resources executives expected to increase basic pay rates by a median 5% – unchanged from the previous two quarters and the joint-highest readings since the survey started in 2012.

Pay expectations in the public sector rose to 4%, the highest recorded by the CIPD, from 3.3%.

The survey of 2,000 employers took place between June 9 and July 5, before Prime Minister Rishi Sunak offered a pay rise of more than 6% to teachers, doctors and other public-sector workers.

Private-sector wage growth expectations of 5% found by the CIPD were in line with those in a recent Bank of England survey of businesses.

The BoE said on Aug. 3 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.

The CIPD said businesses were also becoming more likely to match or exceed pay offers by rivals for their staff.

Two fifths of firms said they had made a counteroffer to keep staff in the past year. Just over half of those firms said they were resorting to counteroffers more than previously, compared with 9% who said the opposite.

Where a counteroffer was made, in 38% of cases it matched the competing salary and in 40% of cases it exceeded it. However, almost a third of employers believed counteroffers were ineffective at keeping staff.

“For some employers, counteroffers may only be valuable as a short-term option and … employees will move if wider aspects of the job, such as workload, autonomy and environment, don’t meet their expectations,” the CIPD said.

(Reporting by David Milliken; Editing by William Schomberg)