Employment growth set to slow while pay lags behind inflation, says CIPD

The rapid rate in employment growth that has seen joblessness fall to 7.1% in Britain, could be set to slow down slightly, according to the latest research from the Chartered Institute of Personal and Development (CIPD).

A survey of over 1,000 employers revealed that despite recruitment intentions remaining positive, the increase has slowed significantly and the vast majority of organisations expect to give pay awards below the current rate of inflation.

This reflects a “productivity hangover”, according to the CIPD, affecting UK employers who have maintained and increased employment over a sustained period of falling output.

The survey revealed that SME’s are more positive about their recruitment expectations than larger organisations, and that almost three quarters of employers are expecting to raise pay by 2% in the 12 months to December 2014.

Gerwyn Davies, the CIPD’s Labour Market Adviser, said:  “Employment growth, normally a lagging indicator of recovery, seems to have preceded the stronger signs of growth we’re now seeing.  So it is unsurprising that employment intentions are now dipping just as economic growth seems to be taking hold, with employers needing to tackle the major productivity hangover affecting the UK economy.

“Weak productivity partly explains why a majority of employers expect to continue awarding below inflation pay rises for their workforce. Sustainable increases in real wages can only be delivered if organisations can boost productivity, for example through smart investment in the training, development and management of their staff.”

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