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UK public-sector pay rises to overtake private ones, employers say
Global Banking & Finance Review®
Company
By Suban Abdulla
LONDON (Reuters) – British public-sector employers now expect to raise pay faster than their private-sector counterparts for the first time since late 2020, after the new Labour government approved big public-sector pay rises funded in part by higher employer taxes.
The Chartered Institute of Personnel and Development said 2,000 employers surveyed from Sept. 18 to Oct. 9 reported that median expected pay rises for the coming 12 months in the public sector had risen to 4% from 2.5% the quarter before.
This took the public sector above the median for private-sector pay settlements, which held at 3%.
Looking at the next three months alone, public-sector employers expected new settlements to raise pay by a median 5%.
“Significant public sector pay awards announced since the election, along with the additional public sector spending announced in the recent budget, have provided a welcome boost to public sector employers and workers,” James Cockett, the CIPD’s senior labour market economist, said.
Shortly after taking office in July, British finance minister Rachel Reeves announced pay rises of 4.75%-6% for millions of public-sector workers.
During the pandemic, public-sector pay lagged behind both rises in the private sector and a sharp increase in inflation.
Cockett said private-sector firms now faced increased costs which would likely affect their hiring plans and wage setting.
Reeves on Oct. 30 unveiled the biggest tax increases since 1993, including a 25 billion pound ($32 billion) jump in social security contributions paid by employers alongside a 6.7% rise in the minimum wage.
These increased business costs are likely to act as a barrier to growth and could lead to employers offering lower pay rises, being more cautious about investing in workers’ skills or taking on new staff,” Cockett said.
Official data on Tuesday is expected to show annual growth in average weekly earnings overall – which tends to be higher than pay settlements – slowed to 4.7% in the three months to September from 4.9% in the three months to August.
The Bank of England is closely monitoring wage growth as it tries to gauge inflation pressure in the economy. Last week it said further interest rate cuts are likely to be gradual after it cut the benchmark Bank Rate to 4.75% from 5%.
($1 = 0.7738 pounds)
(Reporting by Suban Abdulla; editing by David Milliken)
Private-sector pay refers to the salaries and wages paid to employees working in privately owned businesses, which are funded by company revenues.
Median expected pay rise is the middle value of salary increases anticipated by employers, indicating the typical raise employees can expect in a given period.
Employer taxes are taxes that businesses are required to pay on behalf of their employees, including social security contributions and other payroll taxes.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power and affecting economic conditions.
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