By Viv Copeland, Head Of Croner Reward

An interesting year awaits us in the pay and benefits world with outside influences that could affect all companies across the UK.

There are many factors that can influence movements in pay across a whole market. So for example inflation, company performance, recruitment and retention difficulties and staff shortages can all apply upward pressure on pay. Conversely deflation, poor company performance, price challenges and a generally weak economic climate can all exert downward pressure.

We are seeing an increase in interest from existing and new clients who haven’t looked at pay over the last few years, maybe because of implementing pay freezes or redundancies, and for whom pay is now back on the agenda. Updating pay and grading systems to reflect new company structures, and benchmarking pay against the current market are once again becoming a priority for employers large and small.

Pay settlements in 2011 averaged 2.3% and around 17% of private sector organisations had a pay freeze. Inflation by the end of 2011 was running at 4.2%, well above the average rise in pay. Even though inflation is forecast to come down in the coming months, and with pay restraint in the Public Sector, there is still upward pressure on pay negotiations. Forecasts for pay awards for 2012 are 2.5-2.6%, and we have already seen pay awards given in January averaging 2.9%, which is the highest since the Summer of 2009. This coupled with talk of regulation to restrict excessive bonuses and to make executive pay more transparent makes pay something for HR and business professionals to keep a close eye on in 2012.

Of course the Eurozone crisis and the talk of a double dip recession may mean that ultimately the impact of the economy may well dictate the final outcome for pay rises in 2012.

Find out about pay and benefits by region, sector or function at www.cronersolutions.co.uk

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