While the economy grew by 2.6% in 2014, just 28% of organisations said they aimed to be the top payers in their sector. This marks a 7% fall on 2011 figures.
The CIPD's annual Reward Management Survey found that the manufacturing and production (3%) and private sector services (30%) were more likely to position employee pay competitively at the top of the market.
However, the proportion of employers who said they were positioning pay in the bottom 10% or lower quartile of the market has increased from 13% in 2012, to 17% two years later.
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," he said.
According to the research, almost two-thirds (64%) of employers now use competencies as pay progression criteria compared to 50% in 2011 and the use of skills in determining pay progression has increased from 44 to 60% over the same time period.
Cotton said this increasing recognition could be a reflection of the structural changes towards a knowledge-based economy in the UK.
"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," he said.
