Private sector pay still behind inflation, leading to low employee motivation

Date: 07/01/2011

Private sector pay has increased slightly, but is still behind inflation rates, potentially leading to a slump in employee motivation.

According to the Incomes Data Services (IDS), private sector pay awards increased slightly to 2.2 per cent from October – December 2010, after a year of consistency at two per cent.

But despite the rise, it does not compare with inflation which was above four per cent in 2010, only dropping to 3.7 per cent.

And experts forecast that inflation will remain above four per cent throughout 2011.

Ken Mulkearn, editor of IDS pay report, said: "Private sector pay settlements could well rise in 2011, under the influence of higher inflation and the tentative economic recovery.

"But the increase in the cost of living, especially after rail fare rises, and the increase in VAT to 20%, means most employees' pay will be chasing inflation."

This news comes after a CIPD report this week, which suggested that 80,000 private sector workers will lose their jobs this year.

John Philpott, chief economic adviser at the CIPD, called 2011 a "fingers crossed" year for jobs and the economy.

Posted by Elizabeth Mewes

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