Pay rises drop further behind inflation rate

Pay rises are dropping even further behind the rate of inflation, according to an analysis by pay specialist Industrial Relations Services (IRS).

A study of 82 pay awards effective in the three months to the end of July 2008, covering a total of 865,834 employees, found the median pay award stood at 3.5%, up 0.2 percentage points for the previous three months.

Retail prices index (RPI) inflation rose to 5% over the same period, leaving pay awards trailing price increases by one-and-a-half percentage points.

Private sector awards are holding firm with the median award standing at 3.5% for the three months to the end of July. This is the same level as the two previous rolling quarters. However, public sector pay awards remain parked at 2.5% in the 12 months to July.

IRS Pay and Benefits editor Sheila Attwood said: “Recent quarterly economic forecasts suggest that the UK’s economic prospects have worsened significantly over the past few months.

“The labour market is expected to loosen as a result of this, which in turn is likely to reduce the level of pressure on wage demands. To what extent unemployment increases, and inflation falls, between now and the autumn, will be key to the level of pay awards we see at the start of the major bargaining activity in January 2009.”

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