Pay awards reach 22-month high

Pay awards have increased to their highest level in almost two years and there are signs the upward trend will continue, according to research published today by XpertHR.

The median basic pay award in the three months to the end of October 2010 stood at 2.1% – 0.1 percentage point higher than in the three months to the end of September and 0.9 percentage points higher than one year ago.

However, the picture is not as rosy for public sector workers as the rise was largely held up by pay awards in the private sector – the median pay award for public sector employees during the year to October 2010 was nil, compared to 1.5% for the private sector.

The outlook for private sector workers continues to hold promise according to the findings, based on 78 pay reviews effective from 1 August to 31 October 2010 and covering almost 1.5 million employees.

The data indicated that pay awards will continue to hold up into 2011 as a result of a dramatic fall in the number of pay freezes being issued.

During the survey period, just one in 10 (10.3%) pay awards were worth nothing, compared with around one-fifth (19.4%) just a month ago.

However, XpertHR pay and benefits deputy editor Sarah Welfare said that these figures still trailed behind inflation: “Pay awards may have reached their highest level for almost two years, but they continue to lag behind retail prices index inflation. On this measure, inflation stood at 4.5% in October, more than double the going rate for employee pay awards. As we move towards January, one of the busiest months in the pay-setting calendar, we expect to see more pay awards around the 2% mark.”

However, she warned that the Government’s two-year public sector pay freeze takes effect in 2011 for most public sector workers. “It seems that a number of public sector employers have already frozen pay this year for the whole workforce, meaning a real squeeze on low wages in the public sector while inflation remains high,” she added.

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