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Positive signs for private sector pay, says CIPD

Private sector pay settlements may be on the up, according to new research from the Chartered Institute for Personnel and Development (CIPD), but economic uncertainty is making many firms cautious.

The Institute's Labour Market Outlook survey of 1,000 employers asked employers whether they intended to increase, freeze or cut pay in the 12 months to December 2012. Results showed that the intended mean basic pay settlement was 1.7 per cent, against 1.3 per cent at the same time last year. In the private sector, just over a third (35%) of employers predicted a pay rise, with manufacturing and production firms predicting the biggest rises at 2.9 per cent.

In the public sector, the introduction of a 1 per cent pay cap has seen the average pay increase rise to just 0.8 per cent.

These findings may give cause for cautious optimism, but analysts warn against concluding that the worst is now over. Many of those companies surveyed claimed that ongoing economic uncertainty made it impossible for them predict the outcome of their pay decisions at this stage.

Writing in People Management, CIPD rewards adviser Charles Cotton advises firms to ensure that employees are kept in the loop about pay decisions, stressing that 'an honest line of communication with employees is essential to keep staff motivated and engaged. Employees also tend to be more satisfied with their employer's decision over pay if it has been properly explained to them, says Cotton, citing the results of CIPD pay and reward research.

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