Pay awards under pressure as recession looms

The
threat of recession and falls in inflation are forcing UK employers to squeeze
pay awards, according to research by pay analysts Industrial Relation Services
(IRS).

The
figures show that pay awards across the UK economy dipped from 3.2 per cent in
June to just 3 per cent in July.

The spread
of pay deals has shifted downwards, with half of all recorded settlements now
worth less than they were in June 2001.

IRS
suggests that the dip reflects the recent falls in headline inflation – still
the key benchmark in the pay-setting process. Pay awards were lower in both the
retail and service sectors in the first half of this year, suggesting that the recession
is concerning more than just manufacturers, claims the report.

Ninety
seven per cent of deals are still outstripping the prevailing rate of inflation
still providing employees with real increases in take-home pay.

Jeremy
Baugh, editor of IRS Pay and Benefits Bulletin, said, “Despite the
recent rise in average earnings, our figures suggest there is little likelihood
of an upsurge in wage pressure.

“If
the current gloomy outlook for the UK persists, and inflation remains low, it
appears that pay decision-makers may be revising down their expectations still
further over the coming months.”

By
Phil Boucher

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