Almost all private sector staff to get 2% pay increase next year according to Mercer consultants

Almost all private sector staff, no matter where they work, can expect a salary increase of just over 2% next year, according to a major report published this morning.

The findings from consultants Mercer signal that after the long years of contraction and recession, pay increases are definitely back on the agenda.

Mercer said that surveyed 135 firms and almost all — 97% of the sample — have budgeted to pay out salary increases in 2016.

Workers can expect an average pay rise of 2.2% across most pay grades, and pay in the construction industry, which was particularly battered during the deep recession, is increasing too.

The average pay increases mask a wide range of pay increases which could in time open up big pay differentials for employees, depending on the profitability and growth prospects of their employers.

The survey found that the big winners are likely to be staff working for firms in life-science, high-tech and some non-banking service industries, who may strike pay increases of between 2.4% and 2.8%.

Possibly reflecting longer working hours and a pick-up in retail sales, retail and warehousing firms have “budgeted” for salary increases of 2.4%.

With salary increases of 2%, people working in the energy, consumer goods and manufacturing may fare less well.

Banking and financial services firms have budgeted to pay a 1.9% increase next year.

Noel O’Connor, a consultant at Mercer, said that the fall in unemployment was helping to push up pay.

“After a number of years of consolidation in the jobs market, we are beginning to see more activity as employees are increasingly tempted by new opportunities.

"The competition for talent seems to be particularly aggressive in the high-tech, life science and construction industries.”

CSO figures for average earnings and labour costs published late last month suggest pay may already be rising — but probably from a low base.

Average weekly earnings across many employment sectors rose in the third quarter 2.7% from a year earlier.

The CSO reported average weekly earnings increased in 11 of the 13 main sectors in the year with the largest earnings increases posted in the administrative and support services area, where weekly earnings rose 7.6%.

Over five years, average weekly earnings had fallen 10.6% in human health and social work, and had risen by almost 10% in administrative and support services.

Mr O’Connor said staff will likely also seek other non-income incentives to stay with an individual employer.

Unemployment has fallen sharply from its peak of over 15% in early 2012, but remains high.

The CSO said 191,700 people, 8.9% of the labour force, didn’t have jobs in November.

There are also many thousands of people on training courses who do not count toward the unemployment total.

In Britain, workers’ pay grew at a slower than expected pace in the three months to October, figures published last week by its Office for National Statistics showed.

Regular earnings of British workers — excluding bonuses — rose by 2% in the three months to October, its slowest since the three months to February.

Britain’s unemployment rate has fallen to a new seven-year low of 5.2%.