UK EMPLOYEES EXPECT SALARY RISES TO HELP EASE COST-OF-LIVING CRISIS
▶ Average pay hikes this year will be at 4%, down from 5% in 2023, Felicity Glover reports
First, the good news: employees in the UK can expect an average salary rise of about 4 per cent this year. The bad news? This year’s projected salary increase is down from 5 per cent last year and marks the first decrease in wage hikes since before the Covid-19 pandemic began, according to a report by the Chartered Institute of Personal Development (CIPD).
For employees in the country’s embattled public sector, the news is worse, with salary increases set to fall to 3 per cent, from 5 per cent in 2023, the country’s professional body for human resources says in its quarterly Labour Market Outlook report.
“This quarter, we see the tide turning on pay,” the report says. “As inflation continues its descent in 2024, expected pay awards will likely follow suit.”
Inflation in the UK peaked at a record 11.1 per cent in October 2022, leading to a cost-of-living crisis and steep drop in the value of employees’ salaries as they struggled to cover daily living expenses.
However, the UK slipped into recession in the second half of 2023 after the economy shrank 0.3 per cent in the three months to December, according to the Office for National Statistics.
While inflation has eased – in January, the UK’s inflation rate remained steady at 4 per cent and food prices fell for the first time since September 2021 – salary increases are expected to track the cost-of-living index amid a competitive labour market.
“Decreasing staff levels appears to be higher on the agenda in 2024, in response to the higher wage costs experienced over the past couple of years,” the CIPD says.
“This is evident in both the public and private sector, combined with a turn away from continuing to absorb costs or, in the case of the private sector, reduced profits during the period of high inflation.”
Although salary rises in the UK this year will be lower compared with 2023, employees will still be able to negotiate higher increases above the average estimate.
This will depend on the sector an employee is working for, a company’s bottom line, performance reviews and whether or not their role is in demand.
However, the economic landscape is creating a challenging hiring outlook for candidates and employers, says Doug Rode, managing director of the UK and Ireland at Michael Page.
“This trajectory that hiring will continue to tie in with the economic outlook is something we expect to see throughout 2024 – especially when it comes to salary,” Mr Rode says in Michael Page’s 2024 UK Salary Guide.
“Candidates are nervous to move due to uncertainty around job security and clients are becoming increasingly selective about hiring decisions and packages as they look to fulfil their business needs.”
Average salary increases in small to medium enterprises will remain higher at 5 per cent compared with private sector organisations, the CIPD adds.
“This, combined with the finding that fewer SMEs are hiring, indicates that SMEs appear to be focusing on retention of existing staff as we enter 2024,” it says.
“Many people will also benefit from incremental progression or promotions, bonuses or a pay bump when switching jobs.”
The CIPD data, which is based on a poll of more than 2,000 human resources professionals and decision makers in the UK, shows that 24 per cent of organisations in the country plan to increase their employees’ base pay by between 4 per cent and 4.99 per cent.
One in five companies (19 per cent) will increase salaries by 2 per cent to 2.99 per cent, while 12 per cent are planning a pay freeze, it adds.
“However, a larger proportion [17 per cent] are still planning pay rises of above 6 per cent in 2024,” it says.
Meanwhile, jobseekers’ salary package expectations are evolving and they are seeking a better work-life balance and to develop new skills, Mr Rode says.
“As a result, businesses must look beyond the numbers and ensure they’re offering a holistic package to ensure talent – existing and new – feel safe, secure and, most of all, motivated,” he adds.
Attractive employee benefits can give companies a competitive advantage when it comes to recruitment, as well as boosting staff retention, morale and productivity, UK job search engine Adzuna says. Up to two thirds of employees believe the benefits offered to them are equal to or more important than their basic salary, Adzuna said in a blog post in December.
“Demand from employees for benefits may also be on the rise, with 83 per cent of businesses having experienced an increase in requests from employees for enhanced well-being benefits,” it said.
However, three in 10 professionals say they do not receive any workplace benefits, according to a study by recruitment specialist Reed, which surveyed 5,000 employees last November for its 2024 UK salary guide.
The three most common benefits received by employees in the UK are: flexible hours (20 per cent), a company pension higher than the required amount (18 per cent) and an annual salary increment (18 per cent), the Reed survey found.
However, 45 per cent of workers say they would prefer an annual salary increase, 36 per cent want to be offered a fourday working week and 36 per cent want flexitime, it shows.
“In 2021, we saw higher demand for health-related benefits, which reflected the stress the pandemic had on workers,” Reed says in its report.
Other benefits on employees’ wish lists include private health care, a cycle-to-work initiative, life insurance, uncapped annual leave and a gym and wellness programme, Reed says.
The positive effect that yearend bonuses have on employees is well-known. Not only do they boost morale for a job well done, they are also a welcome financial boost for workers, particularly during challenging economic times.
In the UK, 41 per cent of employees do not expect to receive a bonus for their hard work in 2023, according to the Robert Walters 2024 salary guide, which surveyed 4,000 professionals and 2,000 employers for its annual report.
More than two thirds half of professionals (68 per cent) polled for the survey say they would “seriously contemplate” leaving their current job if they missed out on a bonus, it adds.
However, 59 per cent of professionals are expecting a bonus of between 10 per cent and 30 per cent of their salary.
“A year-end bonus remains a crucial retention tool, influencing almost four in five employees’ career plans,” Chris Eldridge, chief executive of Robert Walters UK, says.
“It also helps with motivation for the following year – when people feel appreciated, they are more committed to continuing the hard work to reap the benefits in the years to come.”
Meanwhile, a third of employers polled for the survey say they have not budgeted for end-of-year bonuses, but 52 per cent have, according to Robert Walters.
A year-end bonus remains a crucial retention tool, influencing almost four in five employees’ career plans CHRIS ELDRIDGE
Chief executive of Robert Walters UK