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February 20, 2015

CIPD identifies growing UK pay divide

CIPD identifies growing UK pay divideA tale of two workforces is emerging in the UK because of a “pay divide” between companies that can afford to increase wages by 2% or more and those that are stuck in a pay freeze.

These are the findings of the latest Labour Market Outlook from the Chartered Institute of Personnel and Development (CIPD).

The survey reveals that almost half of the UK workforce has seen either a pay freeze or a pay cut (3% pay cut, 39% pay freeze) in the 12 months to December 2014. In contrast, 40% have received a pay increase of 2% or more and 18% have received a pay increase within the 0.1-1.99% range.

Almost half of private sector firms (48%) said that they gave a basic pay increase of at least 2% during the same period, including 54% of manufacturing and production firms. However, more than a third of manufacturing firms (35%) froze pay.

There’s a similar picture in the services sector. While 47% of services companies awarded a basic pay increase of 2% or more in the 12 months to December 2014, 35% imposed a pay freeze.

Gerwyn Davies, CIPD labour market analyst, said: “The figures show a clear gap between employees that have comfortably exceeded the current inflation rate in their pay packets and those who haven’t seen any increase at all. What’s interesting is that this gap exists within sectors.”

It comes down to productivity, he said. “Productivity lies at the heart of an organisation’s ability to increase real wages above the rate of inflation. Our report implies that the difference within sectors between companies … lies partly in the quality of leadership and management and level of workforce investment.”

Looking ahead, more than two thirds of private sector employers (69%) expect to increase their basic pay award by at least 2% in the 12 months to December 2015.

Davies added: “The role for government is not to cajole business into giving more generous pay awards on the back of stronger economic growth and lower costs, but to understand the levers that can help more firms increase their workplace productivity and move up the quality chain. This includes supporting businesses to improve management practices and encouraging greater investment in skills.”

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