British firms plan to raise employee salaries by the greatest in at least 11 years.

According to a study released today, British firms plan to raise employee salaries by the greatest in at least 11 years, but the 5% pay increases would still be considerably behind price inflation.

The Chartered Institute of Personnel Development (CIPD) reported that 55% of recruiters planned to raise base or variable pay this year as they struggle to hire and retain staff in Britain's competitive labour market. The Bank of England is concerned that the inflation surge will be harder to control if pay deals keep rising.

Expected median annual pay awards in 2023 increased from 4% in the previous three months to 5%, which is the highest level since CIPD records first began in 2012.

More than half of the participants said they had trouble filling positions, and over one-third predicted they would have the same challenges in the following six months.

According to Jon Boys, senior labour market economist at the CIPD, "skills and labour remain scarce in the face of a labour market which continues to be remarkably upbeat given the economic background of growing inflation and the related cost-of-living issue."

The poll also revealed the widening of the salary expectation gap between employers in the public and private sectors.

In accordance with CIPD, planned pay settlements in the public sector dropped from 3% in the previous quarter to 2%, while they increased to 5% in the private sector.

The outcomes underlined how living standards are being squeezed as important workers like nurses, teachers, and public transportation employees, stage a series of strikes over salary and working conditions.

Even while there are indications that the recent increase in inflation has subsided, BoE Governor Andrew Bailey highlighted worries about wage setting last week.

After reaching a 41-year high of 11.1% in October, annual inflation decreased to 10.5% in December.

Although the BoE increased interest rates this month to their highest level since 2008, Bailey said that inflationary pressures were still a cause for concern.

Based on the quarterly study, employers were more likely to take on older workers and those with medical issues who were returning to the workforce.

(investing.com, reuters.com, CIPD.co.uk)