The costs to employers of the national living wage (NLW) are expected to lead to a growth in average salaries of 1.7% in 2016, according to the Chartered Institute of Personnel and Development (CIPD).

A third of businesses surveyed estimated the NLW to raise average salaries by 2%, while 21% said it would lead in weaker pay awards.

Pay expectations are higher among smaller businesses in comparison to larger businesses and private sector organisations which average at 1%.

21% of employers have cited the NLW as a reason for weaker pay growth; while 16% say that national insurance contributions are weighing down wages.

11% say that auto-enrolment will have a negative impact on basic pay.

Mark Beatson, chief economist at the CIPD, said:

“Employers have to manage the consequences of government-imposed increases to the cost of employing people.”

“The national living wage and auto-enrolment were introduced to improve the living standards of low-paid employees, but this can only happen without significant job losses if the productivity of low-paid employees also increases.”