Staff shortages and a need to motivate workers will drive UK buinesses to offer inflation-busting pay rises during their next pay rounds.
While the Bank of England wrestles with rising inflation, companies feel they have to match or beat inflation to retain and attract the right staff.
According to this weeks Accountancy Age/Reed Finance Big Question survey, 61% of UK finance directors expect their companies to award pay rises that will equal or be in excess of the inflation rate of 2.9%.
‘We are in an area of virtually nil unemployment and therefore to attract and retain the right quality of employee we must take into account local conditions,’ said John Collinson, FD at Britax Excelsior.
Others clearly feel that good pay rises are an important factor in the retention of key staff.
‘People are our business and pay reviews to us are not just about keeping pace with inflation, they play an important role in motivating and rewarding our staff,’ said John Davies, FD at Moore & Blatch.
The Bank of England was expected to raise interest rates again this week in an attempt to tackle both rising inflation and house price growth.
But increasing pay levels are bound to make the bank’s task more difficult as the economy grows and demands for staff continue to intensify.
Other FDs were less sure of optimistic pay increases and many predicted they would stick to their historic pay awards of 2.5%.
Some sectors are also immune to the effects of the current tight labour market. Chris Burhop of BFF Nonwovens said: ‘In my experience, the average settlement for manfuacturing has been below the overall national average and this continues to be the case, despite what is currently a tight labour market.’
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