Pay disparity creating two-tier labour market, says CIPD report

SMEs more confident about employment prospects – but less likely to conduct pay reviews.

A widening gap between employers that can afford to increase pay and those who can’t is leading to a “tale of two workforces” in the UK, according to a CIPD report on pay.

The CIPD Labour Market Outlook Winter 2014-15 is based on a poll of more than 1,000 HR professionals and employers. It suggests that while 39% of the British workforce experienced a pay freeze in the 12 months up to December 2014 (with 3% even facing a reduction in pay), 40% saw their salary increase by 2% or more.

This leaves only 18% who have seen their pay increase by 0.1% – 1.99%– described as the “middle corridor” of pay increases.

Almost half (45%) of SME employers froze pay in the 12 months up to December 2014. This compares to 54% of public sector organisations but higher than the average of 39%. However, SME employers are more likely to report higher future hiring intentions than larger organisations (+44 compared to +15).

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Overall almost two-thirds (65%) of employers report the intention to recruit across the next three months. The sectors that have the brightest prospects are healthcare (79%), accommodation and food services (72%), arts, entertainment and recreation (72%) and financial, insurance and real estate sectors (70%).

CIPD labour market analyst Gerwyn Davies commented that the report shows a “clear gap” between employees who have seen their pay match or outstrip inflation and others who have seen no increase at all.

“It comes down to what businesses can afford, and productivity lies at the heart of an organisation’s ability to increase real wages above the rate of inflation,” he said.

“Evidence in our report shows a clear correlation between employers that state they have adopted a high value business strategy (as opposed to a low cost strategy) and those that were able to afford to pay a pay increase of 2% or more.”

Further reading on SMEs: SMEs confident on growth

Praseeda Nair

Praseeda Nair

Praseeda was Editor for from 2016 to 2018.

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