Employers in the UK plan to award pay rises of 3 percent this year, the highest in at least a decade, but the wage deals would still be below fast-rising inflation.

Signs of a tight labour market continue to persist, with many employers saying it will be difficult to fill job vacancies in the coming six months.

The Chartered Institute of Personnel and Development (CIPD) however believes that companies are not going to break the bank to counter their recruitment problems.

The CIPD’s labour market economist, Jonathan Boys told the Guardian newspaper: “Even though businesses anticipate making record pay awards to their employees this year, most people are set to see their real wages fall against the backdrop of high inflation.”

Inflation has risen to its highest level in 30 years, as employers cover rising costs due to supply chain disruptions during the pandemic, and a surge in energy prices. 

Recruitment challenges in store for many employers

Almost half of the recruiters surveyed said they were struggling to fill vacancies, and 41 percent said more staff were leaving – which we know as “The Great Resignation.” 

As well as headline pay rises, workers have been able to win other benefits, ranging from hybrid working at home or offices to a four-day week with no loss of pay.

The report found that it has been difficult to attract workers in sectors like hospitality, which have been hit by the drop in immigration caused by the pandemic and Brexit. 

Economists keep a close watch on the expected wage-price spiral

Some economists are looking for signs of a so-called wage-price spiral, in which workers demand higher pay to compensate for higher prices of goods and services.

In the UK, workers have not seen their wages grow for nearly a decade, and real wages are still less than they were before the financial crisis that started in 2008, according to the Resolution Foundation. 

The Bank of England is monitoring the labour market as it considers how much more interest rates need to rise from their all-time, coronavirus-emergency low.

The Central Bank raised borrowing costs in December and earlier this month, as it forecast that consumer price inflation would peak at about 7.25 percent in April 2022. In comparison, forecast earnings for workers would go up by 3.75, leaving households facing their biggest post-inflation income squeeze in 30 years.

The news comes amid fury over remarks by Bank of England Governor, Andrew Bailey who urged workers to go without pay rises to control inflation. 

Many felt Bailey should have also asked companies to hold prices steady, at the same time.





Feyaza Khan has been a journalist for more than 20 years in print and broadcast. Her special interests include neurodiversity in the workplace, tech, diversity, trauma and wellbeing.