Employers cut real-terms pay despite signs of recovery

Typical pay awards continue to be significantly lower than inflation despite the brighter economic outlook, according to annual XpertHR research published today.

The survey, covering pay awards over the year to the end of August 2013, found that the average pay deal – based on deals covering 7.3 million workers, or almost one in four of the UK workforce – was 2%, well below the 3.3% inflation measured by the Retail Prices Index (RPI) in August 2013.

The median pay increase over the period was just 2%, compared with 2.3% during the previous 12 months.

XpertHR pay and benefits editor Sarah Welfare said: “Our research provides further evidence that pay packets have taken a huge hit during this recession and the value of pay increases in real terms has been eroded. In fact, pay awards appear to have been slightly lower in value this year than the last. The current evidence points to more of the same, with no signs yet of any upward pressures on pay.”

Other key findings, based on a total sample of more than 1,200 pay deals, included the following:

  • Private-sector pay awards were worth a median of 2%, compared with 1% in the public sector. In the previous year, private-sector deals were worth 2.5% while the public sector imposed a pay freeze (0%).
  • Wage freezes are now less common. So far in 2013, they have made up 11% of all pay awards, compared with 18% in 2012 and 38% back in 2009.
  • Manufacturing pay deals (at 2.3%) have been consistently higher than those in the services sector (2%) over the year.

XpertHR has also published its monthly report on pay awards over the most recent quarter, covering the three months to the end of August 2013, which also found the median basic pay award over this period was 2%, unchanged since the three months to the end of April 2013.

The full report, Annual review of pay trends 2013, includes a detailed comparison with the previous year. It looks at pay awards alongside earnings growth and inflation and how awards are being weighted towards lower paid workers. There is also a full analysis of pay freezes throughout the recession.

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