Brexit and pay optimism

By Charles Cotton, CIPD Performance and Reward Adviser

In my last blog, I looked at whether there was a relationship between whether people felt optimistic or pessimistic about the future in light of Brexit and whether they had a pay rise in 2016.

In this blog, I’ll look at whether optimism or pessimism about Brexit is linked to pay expectations for 2017. Interestingly, those private sector staff who are pessimistic about the future because of Brexit are actually marginally more optimistic regarding their pay prospects this year.

The CIPD’s Winter 2016/17 Employee Outlook finds that while 25% of Brexit pessimists hope for a higher salary rise in 2017 compared with 2016, 23% of Brexit optimists forecast the same. While 6% of employees worried about the impact of Brexit think they’ll get a smaller pay increase this year compared with last year, 9% of people optimistic about Brexit think they’ll get a lower rise.

The proportions expecting the same pay rise in 2017 as they got last year are similar (28% of pessimists versus 27% of pessimists) as are the percentages expecting no pay rise (28% for both groups).

However, while virtually no employees who are optimistic about Brexit think their pay will be cut in 2017, 2% of pessimists think it could happen to them.

One may have expected that those who are optimistic about Brexit to have been more optimistic about their pay. However, it could be because they don’t see the benefits of Brexit flowing through into higher pay until after 2017. It may also be that their optimism about Brexit isn’t based on economic issues.

It could also reflect the demographics of those who are supportive of Brexit. Such employees are typically older and so less likely to have enjoyed a pay rise in 2016 compared with their younger colleagues (who tend to be more pessimistic about the future due to Brexit).

What does this mean? One interpretation is that if private sector pay rises are subdued in 2017 due to the economic uncertainty caused by Brexit then optimists may be more willing to accept this outcome than pessimists. However, many pessimists are young workers and so are due to get rises linked to the national and living wages and could get higher increases than the going rate received by the rest of the private sector workforce.

While inflation could boost the size of pay awards in 2017, a lot of salary rises take place between January and April and so if the cost of living rises takes off in the next few months, this will be too late to influence many wage outcomes.

How should employers react? It is unlikely that basing your 2017 pay decisions on whether your employees are pro- or anti-Brexit is going to meet with much success. Instead, you need to treat all employees the same, such as in terms of the performance criteria used to award salary increases and bonuses, and communicate about why you’ve made the pay decision that you have and what needs to happen for pay rise in 2018 to be higher than in 2017.

In case of interest, the situation is very different in the public sector. Those workers who are pessimistic about the future because of Brexit are also pessimistic about their pay prospects over the coming 12 months. While 55% of pessimists don’t expect to get a pay rise in 2017, 0% of optimists expect the same outcome. While 57% of optimists expect a higher wage this year than they got in 2016, just 6% of Brexit optimists think likewise.

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