A survey of more than 1,000 employers carried out by the Chartered Institute of Professional Development (CIPD) showed that short-term employment expectations had increased in the last three months. However employers expect to increase pay awards by just 1% in the next year.
Employers said poor productivity growth, plus an uptick in labour supply, including an increase in EU migrants, ex-welfare claimants and 50-64 year olds looking for a job were the main reasons for the subdued outlook for basic pay.
Almost a quarter of employers said delivering the National Living Wage was a brake on pay growth, a further fifth cited uncertainty over access to the single market after Brexit, and a fifth said the government’s auto-enrolment pensions scheme was a challenge.
Automatic enrolment began for the largest employers in October 2012. The rules require employers to automatically enrol their workers into a defined contributions pension scheme which meets certain minimum requirements, and to make contributions towards the pensions of workers that do not opt out of the scheme once enrolled.
Public sector employers said restraint in the public sector was the main reason they could not match the inflation rate target of 2% in their next basic pay award.
The median for all basic pay hikes that were undertaken in the first six months of 2017 was 1.5%. The CIPD said this could imply that employers had become more pessimistic about basic pay growth over the past six months against the backdrop of a slowing economy.
Despite the pessimism over pay, the report identified a rise in near-term employment expectations in the last three months. The net employment balance for the second quarter of 2017 - a measure of the difference between the proportion of employers who expect to increase staff levels and those who expect to decrease staff levels in the coming three months – showed an increase from +20 to +27.
According to the report there were a median number of 24 applicants for every last low-skilled vacancy employers were trying to fill, compared with 19 candidates for each medium-skilled vacancy and eight applicants for every high-skilled vacancy.
Survey respondents said around half the applicants were suitable for the job they were recruiting for.