The FTSE 100 (^FTSE) was underperforming against its peers on Monday as earnings expectations for public sector pay surged to their highest in a decade,
London’s benchmark index fell 0.3% after opening, while the CAC (^FCHI) gained 0.1% in Paris, and the Frankfurt DAX (^GDAXI) was 0.2% higher.
According to the Chartered Institute of Personnel and Development (CIPD), public sector pay expectations have jumped from 3.3% to 4% in the last three months — the highest rate since 2012.
In its quarterly labour market outlook report, employers across the economy are continuing to come under pressure to boost wages.
Employers expect 5% pay rises in “counteroffers” over the next year in order to keep staff members, down only slightly from growth of 7.7% in the three months to May.
Some 40% of UK employers said they have made a counteroffer in the past 12 months, the CIPD said, whilst 38% of employers who made offers matched the salary of the new job offer, and 40% offered even higher sums.
The report suggests that the UK labour market remains tight, with unemployment still near record lows at 4% in May.
“Employers need to approach [counteroffers] with caution and have clear internal processes for when these situations arise,” Jon Boys, senior labour market economist for the CIPD, said.
“Counteroffers may help to retain key staff and avoid knowledge drains and the cost to hire new people, but this must be weighed up against other considerations. For instance, counteroffers could exacerbate pay gaps, cause equal pay challenges, or result in a drop in employee engagement. They may also only work for the short term.
“While pay is often the most typical focus of a counteroffer, there are other things employers should consider in making roles more attractive, such as flexible working, additional paid holiday, opportunities for career development, or better pension contributions.”
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