Most public sector organisations facing pressure to raise wages

Employers must upskill workforce to compete, experts say

The majority (59 per cent) of public sector organisations say they are under pressure to raise wages across the board, according to the latest Labour Market Outlook survey published by the CIPD.

The report, published today, found that a quarter (25 per cent) of public sector organisations were additionally under either ‘some’ or ‘significant’ pressure to raise wages for particular roles. By contrast, just 24 per cent of employers in the private sector reported facing pressure to increase wages, while while almost four in 10 (38 per cent) said they faced no pressure at all.

The figures suggest that years of public sector pay restraint – including a 1 per cent cap that has been in place since 2013 – have begun to affect engagement and retention within the sector. And Caroline Nugent, president of the Public Sector People Managers Association, said the differentials between public and private were becoming stark. 

“There are some jobs in the public sector that are replicated in the private sector, which typically pays more money,” said Nugent. “Particularly in certain sectors and roles, the private sector offers incentives such as high performance-related pay and bonuses on top of a more competitive salary.

“By contrast, local government has not experienced a pay rise for four years, and then only experienced a 1 per cent increase. The average public sector role is salaried at about £26,000 – which means there are many people who can’t afford to live or travel into the capital, which can lead to both pressure and shortages.”

Productivity, which has been lagging in UK businesses for some time, may also be a factor. Alex Fleming, president of general staffing at The Adecco Group UK&I, said: “It is important to note that productivity remains a critical and national issue for the majority of employers as well as some specific sectors, while some other sectors have other priorities and are focused on filling specific skills gaps that are vital to their business model’s success.”

Nearly a third (29 per cent) of all employers with a vacancy said it was the result of skills shortages, with skills-related vacancies more prevalent in the public sector (18 per cent) than the private sector (13 per cent). The findings suggest pay pressure is unlikely to come from a lack of skills in the current labour market, but public sector employers may be focusing on retention and upskilling their workforce, Nugent said. 

“While it can be hard for public sector organisations to compete with the private sector on pay, they still have lots to offer – particularly with benefits such as flexible working, if people are unable to work full time because of childcare or elderly parents,” she said.

“We also need to upskill our workforce: while problematic, the apprenticeship levy has come at a time when we have to use money for training, and invest in the future. The difficulty is that a lot of training programmes are long-term solutions, not short-term fixes.”

Employers reported median basic pay increase expectations for the year ahead of just 2 per cent. While this is an uptick on the previous quarter’s figure of 1 per cent, it is still in line with official data, which shows basic wage growth has settled at between 1.8-2.2 per cent over the past six months, the lowest wage expectations have been for more than three years

“Over time, we might expect low unemployment levels to lead to increased pressure on pay, as the Bank of England has predicted,” Gerwyn Davies, CIPD senior labour market analyst, said. “However, it is the UK’s ongoing poor productivity growth that’s currently preventing employers from paying more, not their inability to find or retain staff. This is why the chancellor in this month’s budget has to prioritise investments that will support workplace productivity improvements.”