London: Starting salaries are expected to remain low for the rest of the year after a wide-ranging jobs survey found only two per cent of employers handed an above-inflation pay rise to new recruits in the last year.

Only 20 out of 1,000 employers said they had paid a significant rise to new workers, adding to concerns that a surge in job creation over the last 18 months and skills shortages have failed to increase take-home pay.

The survey, by the Chartered Institute of Personnel and Development (CIPD), is likely to make a significant contribution to the debate over wages growth, which official data on Wednesday is expected to show stagnated in June.

A majority of City economists believe figures from the Office for National Statistics could even reveal a fall of 0.1 per cent in wages. Most analysts have dismissed the ONS’s figures, arguing they are skewed by a sharp rise in bonuses last year following the cut in the top rate of tax to 45p (Dh2.7.) They point to surveys showing workers have received pay rises worth between 2 per cent and 2.5 per cent in some sectors, reflecting staff shortages in some industries.

When it publishes its latest inflation report, also due on Wednesday, the Bank Of England is expected to take the ONS figures on board and downgrade its forecast for average wage rises, which it previously forecast would hit 2.5 per cent this year.

The CIPD survey is also likely to play a part in its thinking, especially as pressure on starting salaries was expected to play a part in pushing up average wages.

Instead, the CIPD found in its latest quarterly review that private sector firms expected to pay no more than two per cent in the coming months. Public sector employers said they had pencilled in only one per cent average rises.

The professional body, which represents human resources executives, said: “Despite reports from various business surveys hailing a rise in starting salaries, figures from the CIPD’s Labour Market Outlook reveals that only two per cent of employers report a significant increase in starting salaries.”

It said rival surveys failed to include employers that had refused to conduct a pay review alongside those that had more explicitly frozen salaries at 2013 levels. “The muted pay picture is further supported by the survey, which shows that among those workers who have enjoyed a pay rise this year, the median increase has fallen to two per cent this year from 2.5 per cent in 2013,” it said.


Mark Beatson, the organisation’s chief economist, said he was startled at the high number of employers that had not conducted a pay review. Only two-fifths of employers reported that they had conducted a pay review since the start of 2014, while half of private sector businesses had worked through the traditional April pay round without a review. “Further, statistics show that the number of employers that plan to freeze pay has risen to ten per cent in summer 2014 from eight per cent in the spring report,” he said.

A survey of businesses by Lloyds Bank found that strong growth across the regions had increased employment beyond London and the south-east. The positive outlook for the regions was marred by figures showing business costs rising, which some analysts said could account for the reluctance to pay staff higher wages.

Without a strong rise in wages above the current 2.6 per cent retail prices index (RPI), Bank of England officials will come under pressure to delay interest rate rises until next year. The central bank’s monetary policy committee, which sets interest rates, met earlier this month and agreed to maintain base rates at 0.5%. However, analysts have speculated that one or more members of the nine-strong committee consider the strength of the recovery warrants a rise no later than November.

George Osborne believes booming employment levels will begin to feed through to higher wages in the coming months but Labour accused the chancellor of complacency and presiding over the longest decline in real wages in a century.