Britain’s labour market recovery is yet to translate into higher living standards as earnings growth has slowed, according to a HR trade body.

The CIPD’s annual Reward Management Survey found that the number of organisations who said they were positioning pay in the upper quartile or top 10 per cent of their sector actually fell by 7 percentage points, from 35 per cent recorded in 2011 to 28 per cent in 2014.

Correspondingly, the proportion of employers who said they were positioning pay in the bottom 10 per cent or lower quartile of the market has increased to 17 per cent, from a low of 13 per cent in 2012.

Charles Cotton, Performance and Reward Adviser at the CIPD, said: “With continuing economic growth and recovery of the labour market, we might have expected organisations to be aiming for competitive salaries to attract and retain employees.

“However, this survey shows that so far this isn’t the case. Ongoing productivity challenges are one reason meaning that many employers simply can’t afford to increase salaries significantly across-the-board. On the other hand, where employers have enjoyed access to a steady supply of labour in the market, they simply haven’t been under pressure to raise starting salaries and in turn, this has seen little movement across salary levels in general.”

Economists have argued that the lack of wage growth would leave the economy vulnerable to setbacks, especially as growth has once again become all-too dependent on consumer spending, and reliant on low inflation.​

Cotton added: “What’s important is that businesses ensure they’re regularly monitoring, evaluating and comparing pay, in order to respond to a tightening labour market. They also need to make sure they’re effectively communicating pay decisions to their employees, and it’s here that HR needs to step in and help write the organisational story to put earnings into context, particularly where they might not be increasing.”

The CIPD’s survey also found competencies (the defined behaviours that enable the individual to do their job properly) and skills (the learned ability to carry out tasks within their job well) being increasingly recognised in pay decisions.

As competencies and skills become increasingly being recognised through pay progression and performance based rewards, Cotton described this as being a “positive” step in the right direction as it showed that businesses believed the changes were here to stay.

“If organisations continue to reward the ‘how’ as well as the ‘what’, it may well attract and retain more desired talent into the organisation and add value to the business in the longer term.”