NLW ‘is slowing salary growth,’ says CIPD report

A recent study conducted by the Chartered Institute of Personnel and Development (CIPD) has revealed that George Osborne’s new National Living Wage (NLW) and apprenticeship levy are slowing salary growth.

The CIPD report forecast that pay rises will average approximately 1.7 per cent this year, as employers continue to struggle with the costs and impacts of the recent changes.

Their survey highlighted that around a third of firms expected the NLW to raise average UK salaries by at least 2 per cent. But 21 per cent of the 1,000 employers surveyed said the wage would inspire weaker pay awards.

According to the report, SMEs had significantly higher pay rise expectations than other firms.

Furthermore, 49 per cent of those surveyed said that they had been burdened by vacancies which were proving difficult to fill since the changes were implemented.

Experts have argued that pay growth could remain sluggish until the end of the decade, as the CIPD report suggests that the likes of auto-enrolment, the apprenticeship levy and increases to the NLW will continue to affect the likelihood of employers raising pay across a nationwide employee base.

Mark Beatson, chief economist at the CIPD, said: “Employers are having to manage the consequences of Government-imposed increases to the cost of employing people.

“Simply making low-paid labour more expensive is not the answer and the Government shouldn’t be surprised if some employers choose easier options, such as reducing hours, chipping away at other benefits or making a less generous pay award the next time pay is reviewed.”

For more information on how Moore Thompson can help with advice on NLW and all aspects of payroll, please contact us.