UK Pay Settlements Slightly Decrease in Q1 2024, Industry Survey Shows

According to an industry survey, British employers reached slightly lower pay settlements with staff in the first quarter of 2024, with median basic pay settlements 4.8% higher than a year earlier, down from 5.0% in the previous quarter. The survey indicates that pay awards will likely center around the 5% mark in at least the first half of 2024, despite the slight decrease in Q1.

Early figures for April suggest that pay growth had returned to 5%, cementing the view that employers are still dealing with a tight labor market and the need to attract and retain talent. The Bank of England is closely monitoring pay data, as they aim to see annual wage growth heading back to the 3-4% range from the most recent rate of 6%.

Employers surveyed expect the median pay award for 2024 to be 4%, while a Bank of England survey showed employers anticipate pay growth of 4.9% over the coming year. These expectations align with the overall trend of slightly lower pay settlements in Q1 2024.

Separate figures also showed a decline in the percentage of businesses reporting recruitment difficulties, indicating a potential loosening of the tight labor market that had boosted wages in recent years. The latest Quarterly Recruitment Outlook (QRO) survey by the British Chambers of Commerce (BCC) Insights Unit reveals that 66% of firms reported hiring problems in Q1 2024, down from 76% in the previous quarter. This marks the first time the figure has fallen below 70% since the economy reopened post-pandemic.

Why this matters: The slight decrease in UK pay settlements and the easing of recruitment difficulties in Q1 2024 suggest that the labor market may be starting to stabilize after a period of intense competition for talent and rapid wage growth. These trends have significant implications for both employers and employees as they navigate the evolving economic landscape and make decisions regarding compensation and job opportunities.

Despite the improvement in hiring conditions, the majority of businesses are still struggling to increase investment in workplace training, with just over a quarter (26%) reporting an increase in staff training investment. As the UK economy continues to adapt to the post-pandemic reality, employers will need to strike a balance between managing labor costs and investing in the development of their workforce to remain competitive in the long run.

Key Takeaways

• UK pay settlements in Q1 2024 were 4.8% higher YoY, down from 5.0% in prior quarter.
• Pay growth expected to center around 5% in H1 2024, despite slight Q1 decrease.
• Employers anticipate median 4% pay award for 2024, in line with lower Q1 settlements.
• Recruitment difficulties declined, with 66% of firms reporting hiring problems in Q1 2024.
• Majority of firms struggle to increase staff training investment despite easing labor market.