Pay intentions have risen to their highest level since spring 2009, according to new data taken from a survey of more than 1,000 employers, commissioned by the Chartered Institute of Personnel and Development (CIPD).

The survey, which asked employers if they planned to increase, freeze or decrease pay in the 12 months to December 2012, found that the expected mean basic pay settlement* was 1.7%, compared with 1.5% in the previous quarter and 1.3% at the same time last year.

Overall, the mood seems to be one of cautious optimism. The public sector has announced a 1% pay cap, to replace the pay freeze, meaning that the proportion of employers forecasting a pay increase in this sector has jumped from 12% to 30%, with average public sector pay increases jumping from 0.3% to 0.8%. On average, just 16% of all employers predict a pay freeze for the coming year, but this ranges from 9% in the private sector to 40% in the public sector.

In the private sector, 35% of employers predict a pay rise (unchanged from last quarter), with the average increase creeping up from 2.1% to 2.2%. Among those planning to increase pay, manufacturing and production firms are forecasting the highest rises (2.9%), followed by those in the service sector (2.7%).

However amongst many employers, particularly those from the private and voluntary sectors, a level of uncertainty prevailed; with 55% and 56% respectively saying that it was too early to predict the outcome of their pay decision.

Charles Cotton, CIPD rewards adviser, comments: “While the predicted increases in pay settlements reflects a cautious optimism among members in the private sector that the worst may now be over, uncertainty about how fast the economy will improve is acting to moderate pay forecasts and leading many employers to hedge their bets on the outcome of the final decision. As we move further into the pay round and as organisations get a better idea of how well they and the economy are likely to perform, we should see fewer feeling unable to predict the outcome of their annual pay decisions.”

Interestingly, the survey did find that whether instituting a pay rise, or not, employees are more satisfied with their employer’s pay decision if their employer has taken the time to explain the rationale behind that decision. It also found, that among those employers that do talk to employees about the basis of their pay rise, few took the opportunity to explain to staff what needed to happen in the next 12 months for staff to get another increase.

* This figure is the average across all firms surveyed, and therefore includes pay increases, freezes and decreases. It excludes bonuses, incremental increases, overtime and impact of regrading exercises.

The office of national statistics announced yesterday, that the consumer price index had dropped from 4.2% in December to 3.6%; but is it good news?

The reason behind the fall has largely been attributed to the removal from consideration of the impact of the coalitions VAT rise, and the smaller increases in petrol prices.

However, as 3.6% is still well above the optimum of 2%, in his message to George Osbourne, the governor of the Bank of England is likely to repeat that, “although inflation is now falling broadly as expected, the process of rebalancing still has a long way to go. Growth remains weak and unemployment is high.”

Overall this news seems to be a bit of a mixed bag – for instance, whilst statistics show that there have been small falls in the cost of footwear, clothing, household goods and transport, the prices of alcohol and household services have increased slightly. More importantly wages still aren’t increasing in line with this higher inflation, and for many people things are still difficult as bills rise over and above what they earn.

Inflation is expected to fall further in the coming months, partly reflecting the falling energy prices, but it seems that the economy still has a way to go in the process of rebalancing.

Although a gloomy end to 2011 for the sector, City accountancy and finance jobs have seen a huge growth in January as small and medium sized banks hire those flooding out of investment banks.

From 1,490 jobs on offer in the City of London in December, when major investment banks increased redundancies, to 4,050 in January, there has been a major boost in the jobs market over the past few months. This figure is still down 25% compared to January 2011, however.

The reason for the large increase seems to be down to smaller and younger firms swooping on highly qualified staff as they leave large investment banks, who have announced over 130,000 job cuts since mid-2011.

While some smaller firms have also cut back, many have instead been raiding their bigger rivals for staff. Unlike previous trends, most of the advertised job vacancies are outside of the top 10 investment banks.

COO in accounting recruitment Mark Cameron said: “Some City firms may also take the view that – as the downturn may have forced competing organisations to shrink and close down areas of their business – now is the time to capitalise and take on additional staff.”

City bankers, although more cautious, are less likely to quit their jobs if they don’t receive big bonuses this year, a recent survey has found.

Just a third of City workers say that they would walk out if their bonus is disappointing, compared to half of bankers who said they would leave over small bonuses this time last year.

More effort has been put into explaining why bonuses would be lower for everyone this year and has had an impact on bankers’ expectations.

Mark Cameron, COO of City recruitment first said: “When bonuses are poor, City employers worry that high levels of staff resignations will follow. That is going to be less of a problem after this year’s bonus round.”

12% of workers surveyed that they expect no bonus for the past year. While this will tempt some individuals to leave their jobs for better deals, one in seven said that they would “actively lobby” their employers if they were dissatisfied with their bonus.

The survey did also reveal that 1 in 10 bankers have thought about moving abroad to places that are thriving financially, such as Hong Kong or Singapore to hunt out the best deals.

A recent survey of senior accounting and HR professionals found that more than half (52%) of those asked expected recruitment at the beginning of this year.

Only slightly fewer (48%) expected their salaries to increase and 58% expect bonuses to increase to 20% of base salaries in 2012.

Accounting and Finance COO Chris Leeson commented: “This cautiously positive sentiment from our survey respondents illustrated the start of jobs market recovery that we saw in 2011 for accounting and finance professionals and the business support jobs market.

“Commercial organisations really started to increase their hiring of accounting professionals in 2011 compared to 2009 and 2010. Professional services firms are also showing greater inclination to hire new staff, particularly in specialist and advisory-related functions.

“However, the public sector has seen a market decrease in hiring activity in the last year due to Government austerity measures forcing cutbacks.”

From Accountancy Age:

Taxpayers are unlikely to be able to seek billions of pounds in compound interest from the taxman from overpaid VAT, according to senior European opinion.

The advocate general in the European Court of Justice has decided that overpaid VAT by UK taxpayers, due after HMRC breached European law, would only require simple interest applied to it.

Taxpayers had argued that the overpaid tax, some of which dates back to 1973, should be subject to compound interest.

However, advocate general Trstenjak said that taxpayers would be unlikely to be able to claim compound interest when delivering opinion on the Littlewoods case.

The advocate general’s opinion is usually followed by the judges in the European courts.

“This is a significant blow to thousands of British businesses which are contesting VAT claims,” said McGrigors tax partner Stuart Walsh.

“Given the vast sum of money at stake and the parlous state of the public finances, this guidance could provide a major boost to the Treasury’s coffers.

“Allowing HMRC to pay simple interest below the base rate effectively incentivises it to sit on taxpayers’ money to improve its own cashflow position. Compound interest would have removed that perverse incentive.”

Following criticisms that the business records checks carried out by HM Revenue & Customs were unfairly targeting small businesses, the scheme is being reviewed.

The taxmen have been accused of harassing firms by conducting spot checks on their record-keeping asking to see records to back up tax returns going back many years, with fines of up to £3,000 for those unable to do so.

Whereas the checks seem to crack down on small businesses, large corporations are let off huge sums of money in tax, leading to accusations of the tax office operating double standards.

Although this controversy has prompted the initiative to be reviewed, the business record checks will continue to be carried out while the review is being administered. HMRC aims to complete 12,000 checks before April.

The Federation of Small Businesses’ (FSB) national chairman John Walker has said: “Despite the worsening economy, HMRC is launching this scheme regardless of the consequences.

“We have spoken to HMRC and expressed our concerns about this a number of times. But as far as they and ministers and concerned it is a policy aim to make this happen.

“There is a huge difference between the rhetoric of the Government about helping small businesses and what it is doing in reality.”

A HMRC spokesperson has responded to the criticisms as follows:

“HMRC recognises that the launch of the Business Records Checks pilots has caused considerable concern to the tax profession, and that the project would have benefited from more detailed consultation with tax professionals at an earlier stage. In the light of these concerns, HMRC will undertake a strategic review of the project, in consultation with the professional and representative bodies.”

It is hoped that the scheme review impacts small businesses positively. In any case, be sure to take extra care to be prepared in the case of a call to check your businesses’ records.

Financial services contributed more than 12% of the government’s total tax take in 2010/11, the City of London Corporation has claimed.

An annual study published today said that banks and financial institutions paid £63bn up from £53bn in 2009/10. The report put this down to the one-off tax on bankers’ bonus and the 50% top rate of tax.

The report concluded that it would be tough for Whitehall to rebalance the economy away from the sector.

“We’ve always been supportive of rebalancing,” Stuart Fraser, policy chairman at the City of London Corporation told the Financial Times. “But we believe the way to get there is not by shrinking the financial services industry, but by building up other industries.”