HR should not be a passive spectator

By Charles Cotton, CIPD Public Policy Adviser - Reward    

Pay forecasts for the coming 12 months do not indicate that the UK economy will be expanding significantly anytime soon. The CIPD’s summer Labour Market Outlook found that 17% of employers questioned are postponing their pay decision. Of the 83% that are sticking to their existing pay timetable, 48% are unable to predict the outcome.

Unsurprisingly, those with imminent pay decisions are less hesitant about making a prediction about the outcome than those with decisions further away in the year. While 30% of respondents with pay decisions due in June–August 2012 are unsure about outcome, this proportion jumps to 64% for those with pay decisions due in December 2012–February 2013.

This uncertainty is especially rampant in the private sector. Overall, 50% of manufacturing and production firms are simply unable to make an educated guess as to whether pay may be increased, frozen or cut in the next 12 months, while in the private service sector the proportion is 54%.

In total, just 30% of respondents predict that they would be increasing pay in the next 12 months. The proportion of public sector employers (26%) forecasting that they will increase salaries is not that far behind the number of private sector firms (31%).

Where the sectors differ is in the size of the predicted median pay award, with the size of the private sector pay award (3%) being three time higher than that forecast in the public sector (1%). Similarly, the number of public sector employers predicting a pay freeze (36%) is more than three times the number of private sector companies (11%).

Taking in to account pay rises, cuts and freezes, pay is only predicted to increase at the median by 1%, 2% in the private sector, 1% in the voluntary sector and 0% in the public sector. The only bright spots on the horizon is that inflation is currently predicted to carry on falling and that the personal allowance is due to increase to £10,000 giving much needed relief to worker pay packets. But how low and for how long will inflation fall? Possibly not that low or for that long.

Are we in danger of witnessing a polarised workforce with the very rich at one end of the earnings spectrum and the rest at the other end, growing increasingly anxious and resentful as their living standards fall and their employers seem indifferent to their circumstances? However, HR does not have to be a passive spectator. It can and should make a difference by investing in policies and practices that mitigate against stagnant rewards and falling employee engagement.

Take part in the Risk and Reward Management survey - closes at 2pm on Thursday 6 September 2012

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  • agreed, but it takes long time to convince the management that  HR can be a Business partner especially in south asian corporate culture