The long economic downturn of the past decade has had a range of effects on pay levels. These include: economic pressures to reduce wages; government pressure to limit public sector pay (often a benchmark for charities); the introduction of a national living wage set at £7.50 an hour for the over-25s from 1 April; and the creation of a nationwide living wage campaign from the Living Wage Foundation that posits a more realistic figure of £8.45 an hour across the UK and £9.75 in London.
Although unemployment has fallen significantly over the past six years, the impact of Brexit is yet to be truly understood or felt in the economy. The one clear effect has been the decline in the value of sterling, which has led to a rise in consumer price inflation.
The Office for Budget Responsibility forecast that Consumer Price Index inflation - the preferred inflation measure - would rise above 2 per cent early this year, peaking at 2.6 per cent. Independent forecasts compiled by the Treasury put CPI inflation in the fourth quarter of 2017 at an average of 2.7 per cent, and inflation as measured by the Retail Price Index at 3.3 per cent.
The latest figures are that CPI increased to 1.8 per cent in January 2017 from 1.6 per cent in December 2016. If owner-occupier housing costs are included, the CPI rose to 2.0 per cent in January 2017 from 1.7 per cent in December 2016. Annual RPI inflation moved to 2.6 per cent in January 2017 from 2.5 per cent in December the previous year.
The mid-point in pay settlements in the private sector has been stuck at 2 per cent for more than two years, while most of the public sector remains subject to a 1 per cent cap on average pay rises since 2012. Cost-of-living awards have been more buoyant (up to 2.3 per cent) in the private sector in early 2017. A survey by the Chartered Institute of Personnel and Development in autumn 2016 found that pay increase expectations for the next 12 months were 2 to 2.5 per cent for the private sector, 1.8 per cent for the voluntary sector and 1 per cent for the public sector.
In the current economic climate this has resulted in workforce unhappiness at their pay packets, but also an unwillingness for people to move jobs given the uncertainty and decreasing opportunities in local government and some parts of the third sector. The market positioning for the salaries of some senior and highly specialist posts remains important. It is not possible to fall too far behind the median if you want to recruit skilled and competent staff at these levels.
There are particular challenges recruiting fundraisers at present, and for posts with highly specialised roles requiring experience. So I would look at a cost-of-living award of between 1 and 2 per cent depending on other factors putting pressure on your budgets. Those on the national living wage have to take precedence, of course. I would also advise looking at the Living Wage Foundation rates in your area and trying to match them if you can. If none of this seems possible, the first consideration is paying the mandatory national pay rates. Instead of making a cost-of-living award, which increases basic pay, charities should consider offering a non-renewable bonus at Christmas if you have the money in your budget.
Gill Taylor is a sector HR consultant
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