Public sector gets a boost as employment intentions bounce back and pay plans overtake the private sector

The public sector workforce has benefited from a post-election boost as expected public sector pay awards have overtaken those in the private sector for the first time since Autumn 2020, according to the latest Labour Market Outlook from the CIPD.  

The report found that the public sector has gone from the sector with the lowest median expected pay awards (2.5%) to the highest (4%) in just one quarter, with even higher awards of 5% expected in the next three months. In contrast, overall and private sector pay awards over the next three months and 12 months are expected to be 3%. 

To support sustainable pay growth in all sectors, the CIPD is calling on the Government to set out how it plans to work in partnership with employers to boost innovation and productivity across the economy through its forthcoming industrial strategy. 

The post-election ‘bounce back’ in the public sector can also be seen in the report’s net employment balance, which measures the difference between employers expecting to increase staff levels in the next three months and those expecting to decrease staff levels. The public sector net employment balance rose significantly from -1 to +6 among public sector employers while the overall net employment balance edged up more modestly from +18 to +21.  

James Cockett, senior labour market economist at the CIPD, the professional body for HR and people development comments:

“Significant public sector pay awards announced since the election, along with the additional public sector spending announced in the recent Budget, have provided a welcome boost to public sector employers and workers.  

“This should help support the NHS and the delivery of other key public services in the shorter-term. However, improvements to people management capability and technology adoption will be needed to raise efficiency in the public sector to respond to rising demands on services and spending constraints over the longer-term. 

“In contrast to the public sector, anticipated private sector pay awards have plateaued and are likely to face downward pressure following the increase to employer National Insurance contributions and to the National Minimum Wage announced in the Budget.  

“These increased business costs are likely to act as a barrier to growth and could lead to employers offering lower pay rises, being more cautious about investing in workers’ skills or taking on new staff. 

“Raising productivity will be key. It’s crucial the Government sets how it is planning to work with employers to improve productivity, wages and living standards across the economy through its forthcoming industrial strategy and through changes to key areas of policy such as skills, innovation and business support.” 

The quarterly report from the CIPD is based on a survey of more than 2,000 employers on their hiring, pay and redundancy intentions.  

Further highlights include:  

• The net employment score is highest in care, social work and other healthcare roles (excluding hospitals, GPs and dental settings) at +47 followed by construction at +43  

• Challenges with hard to fill vacancies persist. Just over a third (36%) of all employers have hard-to-fill vacancies, rising to 42% in the public sector compared to 34% in the private sector.   

Focus on: Inclusive recruitment

The survey also explored employer plans to hire from disadvantaged or under-represented groups in the labour market, such as older workers, parents returning to work and those with disabilities or long-term health conditions.  

Whilst private sector SMEs are less likely to be planning to recruit overall, it found that:  

• One in five (21%) say their organisation is not planning or likely to recruit from any underrepresented group in the next three years, compared to just 4% of large private sector and public sector employers. 

• And just 13% of private sector SMEs plan to hire those with a disability or long-term health condition in the next three years compared to 42% of those from large private sector businesses, and 43% of public sector employers. This is despite this group making up one in four of the working age population. 

• Only a fifth of private sector SMEs (22%) are likely to hire parent returners in the next three years, half the rate of larger private and public sector companies (46% and 45% respectively).  

Ben Willmott, head of public policy at the CIPD adds:  

“Measures from the Budget and the Government’s Plan to Make Work Pay stand to have a significant impact on employers’ growth and hiring plans and could risk undermining efforts to improve labour market participation. 

“Our data shows it will be particularly important for Government to consider how to provide enhanced support to SMEs, many of which are already hesitant about hiring people from disadvantaged groups.” 

Read the report