Small and medium-sized enterprises (SMEs) in the UK are gearing up for a slowdown in pay rises this year, according to the Chartered Institute of Personnel and Development (CIPD).

Despite a backdrop of improved business confidence, employers within the SME sector are anticipating the lowest pay rise increase since the pandemic, with the average expected to drop from 5% to 4% in 2024.

This shift marks a departure from the consistent 5% average observed for over a year, making this year the first in which a decline in pay has been predicted since the onset of the pandemic.

The CIPD’s analysis also highlights a divergence between pay rises in the private and public sectors, with the expected increase in the public sector declining from 5% to 3%.

Derek Mackenzie, CEO of Investigo, part of The IN Group, stressed the importance of considering various factors beyond pay in the employment landscape. “Organisations must offer aspects such as career progression, flexible workplace policies, training programmes, a supporting culture, career mentoring, and other factors to make staff feel welcomed and valued,” Mackenzie remarked.

Highlighting the significance of training in enhancing employees’ skills and market value, Mackenzie underscored the need for organizations to prioritise their workforce during economic uncertainty.

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The CIPD’s findings coincide with a trend of employers, particularly SMEs, limiting planned hires compared to previous quarters. The organisation expects the strain on the labour market to ease as competition for staff reduces. Notably, one-third of SME employers plan to increase staff numbers over the next three months, while 10% are set to decrease their headcount.

Elizabeth Anderson, CEO of the Digital Poverty Alliance, raised concerns about the potential impact of economic uncertainty on digital accessibility, particularly for SMEs.

She said: “During times of economic uncertainty, it is important to ensure that more people don’t fall victim to the digital divide as they contend with rising inflation against broadband and essential devices such as laptops.”

Anderson emphasised the responsibility of government and SME employers to equip their staff with necessary digital resources, preventing an increase in digital poverty that currently affects as many as 19 million people across the UK.