Pay rises lag far behind inflation in 2011

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Analysis published today highlights the extent to which pay increases have languished below the prevailing rate of inflation.

XpertHR’s review of pay bargaining across the economy so far this year reveals that the median pay award sit at 2.2%, which compares poorly with retail prices index inflation of 5.2% over the same period.

The findings are based on details of 1,482 pay awards recorded by XpertHR, covering 7.9 million employees – equivalent to 27.1% of the UK workforce.

XpertHR pay and benefits editor Sheila Attwood said the situation shows no immediate signs of improvement: “Pay award levels remain historically low, and well below the rate of inflation. Few employers have made any efforts to mitigate this in other areas of reward as the finances are not available to do so.”

According to XpertHR, the modest growth in wages seen so far in 2011 is also likely to continue at least until the January wage round begins. Pay awards in the three months to the end of August 2011 remain at a median 2%, unchanged since the quarter to April. Inflation is not expected to fall significantly until January 2012.

Other key findings on pay awards over the past year include:

  • The most common influence on pay settlements over the past year was company performance/ability to pay. This was followed by inflation, although few organisations now include an explicit link to inflation.
  • 16.4% of pay settlements resulted in a pay freeze – 93.1% of these employees receiving a pay freeze work in the public sector, compared with just 6.9% in the private sector.
  • Pay freezes are most common in the not-for-profit and public sectors.
  • Six pay awards in 10 (59.7%) are higher than those received by the same group of employees in the previous year.

The research also revealed that few private sector organisations have tried to mitigate low pay awards. Just 15.8% reported that they had made efforts to compensate employees for “low or zero” pay awards. Among those that had done so, the most popular action was the payment of a non-consolidated lump sum. This was closely followed by bonuses, additional annual leave, training opportunities and additional or extended benefits.

View the reports in full on XpertHR:

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