The Office for National Statistics has reported that wage growth in the UK is at its highest in almost 10 years.
Pay excluding bonuses rose by 3.1% in the three months to August 2018 compared with the same period a year ago. This increase was just above inflation, which for this period was 2.5%.
ONS’S head of labour market, David Freeman, was reported as saying “People’s regular monthly wage packets grew at their strongest rate in almost a decade, but, allowing for inflation, the growth was much more subdued.”
The ONS also reported that the number of people in work remained at a near-record high, while the unemployment rate was at its lowest since the mid-1970s.
The growth is in line with the Bank of England’s expectations: in August, it said that it expected total pay to be growing at a rate of 2.5% a year by the end of 2018, climbing to 3.5% by the end of 2020.
However, the British Chambers of Commerce (BCC) has pointed out that the pace of pay growth is unlikely to continue. Personnel Today reported that Suren Thiru, head of economics at the BCC, said: “While wage growth increased again, the pace at which pay growth is exceeding price growth remains well below the historic average, meaning the current squeeze on spending power is unlikely to ease.”
Pay growth is also still under the 4% average recorded before the 2008 financial crisis and Personnel Today reported that the Resolution Foundation had added that “real-terms pay still remains £12 below its pre-crisis peak. Earnings recovery has a long way to go”.
The CIPD reported that employers are more confident about hiring staff and job vacancies are reaching a new record level. A reduction in the number of candidates is feeding into recruitment and retention challenges for employers especially those that have relied on non UK Labour to fill roles.
Finally. the latest figures from Incomes Data Research puts inflation rising sharply to 3.9% on the all- items RPI measure. The rise is reported as 2.9% on CPI and 2.7% on CPIH and this will put continued pressure on wages to rise.
According to latest figures from IDR, the median pay settlement across the economy rose to 2.4% in the three months to July. Therefore pay is still not keeping up with inflation and employers could find that pay is still sitting high on the agenda with their employees in the coming months.
For more information and help on pay, salary benchmarking and employee reward contact Halcyon HR Consulting Ltd.