The CIPD said 2,000 employers surveyed from September 18 to October 9 reported that median expected pay rises for the coming 12 months in the public sector had increased to 4% from 2.5% the quarter before
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 (CIPD) said 2,000 employers surveyed from September 18 to October 9 reported that median expected pay rises for the coming 12 months in the public sector had increased 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 increase 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, according to James Cockett, the CIPD’s senior labour market economist.
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 rise in inflation.
Cockett said private-sector firms now faced higher costs which would likely impact their hiring plans and wage setting.
Reeves on October 30 unveiled the biggest tax increases since 1993, including a £25 billion jump in social security contributions paid by employers alongside a 6.7% increase 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, he added.