2010 pay rises will remain low as long-term deals expire

Employees face another year of hard bargaining and low pay rises, the Labour Research Department has warned.

Its annual pay round analysis found a decline in the number of new long-term deals – pay agreements that provide a formula covering more than one year – used in both the public and private sectors.

The organisation, which produces research on behalf of trade unions and the labour movement, argues that the slowing, rather than ‘total wipeout’ of pay rises during the recession has been due to the strong presence of pre-negotiated long-term deals between employers and unions.

But the Labour Research Department findings, based on on 774 known pay deals during the 2008 to 2009 pay round, revealed that many of the long-term deals end this year and will not be renewed.

Only 15% of all settlements next year will be the result of existing long-term deals, in comparison with more than one-quarter this year (26%).

Where pay deals are already known for 2009-10 the Labour Research Department said the pattern looks similar to 2009: wage freezes will continue – for example at Jaguar LandRover and in the plumbing industry – along with very low increases.

However, most settlements are likely to be between 2% and 2.5% at places such as Ford, Balfour Beatty Rail and Shell UK Oil, it said.

“The partial retreat from long-term deals could result in more subdued pay growth in 2010,” Lewis Emery, the Labour Research Department’s pay and conditions researcher said.

“We have seen some pick-up of pay settlement levels since April. However, at least four crucial questions overshadow the chances of continuing pay growth: will current pay freezes be lifted? What kind of pay offers will employers make with fewer long term deals setting the pace? Will RPI inflation return? And most decisively of all, what will happen with public sector pay?”

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