UK employers are anticipated to offer pay hikes of up to five percent in the coming year, to retain their workforce.
This is the highest projected increase since 2012, consistent with the trends observed over the last two quarters.
This information is based on a survey conducted with 2,000 HR executives by the Chartered Institute of Personnel and Development (CIPD).
The survey also highlighted a rise in ‘counteroffers’ made by employers.
These counteroffers are attempts to retain staff who have expressed a desire to leave by presenting them with better offers than they might receive elsewhere.
This could be in the form of higher salaries or additional perks.
According to the CIPD’s findings:
- 40 percent of UK employers have made a counteroffer in the past year.
- 38 percent of these employers matched the salary of the new job offer presented to the employee.
- 40 percent went above and beyond, offering even higher amounts.
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UK labour market is strong
The data suggests that the UK’s labour market remains robust. Unemployment was at a near-record low of four percent in May, even though it saw a slight increase from 3.8 percent in April.
The Bank of England has raised interest rates incrementally to combat persistent inflation. This move is anticipated to slow down the UK economy, potentially leading to higher employment rates.
However, significant changes in this direction are yet to be observed.
Interestingly, the wage data set to be released on Tuesday (August 15th 2023) is expected to indicate further increases.
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The Bank of England noted earlier in August that wage growth hasn’t decelerated, posing a risk of ongoing high inflation and a potential rise in interest rates.
London stands out in the context of counteroffers. 58 percent of employers based in the city made a counteroffer in the past year, earning it the title of the “counteroffer capital” of the UK.
Jon Boys, a senior labour market economist at CIPD, commented on the trend.
He emphasized that while counteroffers can be effective in retaining essential staff and preventing knowledge loss, they come with their set of challenges.
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These can range from exacerbating pay disparities, potential equal pay issues, or even a decline in employee morale.
Boys also pointed out that counteroffers might only be a short-term solution.
Beyond salary, employers should also consider other incentives like flexible working hours, additional holidays, career advancement opportunities, or enhanced pension contributions to make roles more appealing.
