An increase in the number of workers from the EU, ex-welfare claimants and older workers are key factors in the predictions of modest pay increases, said the Chartered Institute of Personnel and Development (CIPD) and Adecco Group.
The increase in the supply of labour has led to 24 applicants chasing every low-skilled job, 19 candidates for medium-skilled and eight for high skilled posts.
Almost one in four firms say that the national living wage has put a brake on pay growth, while one in five say the Government’s auto -enrolment pensions scheme is a “challenge”.
Gerwyn Davies of the CIPD, the professional body for human resources employees, said: “Predictions of pay growth increasing alongside employment growth is the dog that hasn’t barked for some time now, and we are still yet to see tangible signs of this situation changing in the near-term.
“The facts remain that productivity levels are stagnant, public sector pay increases remain modest, while wage costs and uncertainty over access to the EU market have increased for some employers.
“At the same time, it is also clear that the majority of employers have still been able to find suitable candidates to employ at current wage rates due to a strong labour supply until now.
“The good news is that the UK labour market continues to go from strength to strength.
“This is good news for jobseekers, especially the long-term unemployed, who have recently been able to move into work quicker than in the past.
“Against the backdrop of future migration restrictions and a tight labour market, the need for a workforce development plan is greater than ever.”
The news comes as research revealed workplace pension saving has become “the norm” for many employees.
The Government is currently reviewing how to continue to build upon the success of automatic enrolment and how to encourage as many people as possible to save into a workplace pension.
The review will report to Parliament by the end of 2017.