Rising inflation has not affected pay rates

Rising inflation has yet to affect pay rates, with the median award remaining at 1% for the three months to 30 April, according to IRS research published exclusively on XpertHR.


While the headline rate of inflation, as denoted by the retail prices index – the yardstick used by the overwhelming majority of pay decision makers – hit a 19-year high in April at 5.3%, the median pay award has now remained at 1% for four consecutive rolling quarters, IRS said.


The figures, based on provisional analysis of 113 settlements, cover the three months between 1 February and 30 April. While January deals have now dropped out of the latest calculations, they have been replaced by a new crop of April reviews, giving a first glimpse of bargaining outcomes in what is a crucial month in the annual wage round.


While employments experts have predicted high inflation will increase the pressure on employers to raise wages, the analysis of these April deals suggests the opposite may be the case right now.


The median award for the 93 deals with anniversary dates falling in April alone is 0.75%, below the 1% recorded for the key month of January.


This suggests that continued economic weakness, together with high levels of unemployment and public sector pay restraint, may be countering the upward drift in RPI inflation, according to Adam Geldman, deputy editor for pay and benefits at XpertHR.


“On the evidence of recent months the link between pay and inflation, while not broken, may have been substantially weakened, notably by the effects of the recession,” he said.


The IRS research also shows that public sector deals are on the wane, falling from 2% in the year to March to 1% in the 12 months to April. They are now at running at exactly the same level as those in the private sector.

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