Employers predict similar pay increases for 2009

Private sector employers are forecasting a median (mid-point) pay award of 3.5% in 2008-09, according to research.

In a survey of 268 private sector companies and 540 employee groups by Personnel Today’s sister publication IRS Employment Review, showed that, despite the economic gloom, employers believe they are predicting the median pay increase in the year from September 2008 to August 2009 will be 3.5% – the same level as predicted last year for the 2007-08 pay round. However, it is slightly higher than the 3.3% median basic pay award so far recorded by IRS.

While this year’s median pay increases fell short of employer predictions, next year, 38.9% of employees are expected to receive a higher pay increase than they received this year – up from 33.4% in the 2007-08 pay round. However, the number of pay awards expected to be lower has also increased, from 16.7% in 2007-08, to 19.7% in 2008-09. And 41.4% are predicted to receive the same amount next year.

The most optimistic sector is manufacturing, where industry predicts a median pay rise of 4% for the following year, with half of all pay awards expected to be worth between 3% and 4.5%. More than half (51.2%) of their pay awards are expected to be worth 4% or more.

However respondents in the services sector were less optimistic. They were forecasting a median pay increase of 3% for 2008-09, with half of all pay awards expected to be worth between 3% and 4%. Four in 10 (41.9%) of their pay awards are expected to be worth 4% or more.

The main influences on next year’s pay awards will centre on company performance/ability to pay, inflation, and pay levels in the same industry.

The most important upward pressure on the awards will be inflation/cost of living. Employers will also be checking on how their pay rates compare with the market, with 41.2% of next year’s pay awards expecting to be pushed up as a result. And 39% of respondents said that company performance/ability to pay could place upward pressure on their pay awards.

The biggest downward pressures on pay awards were expected to be company performance/ability to pay (82.6%) inability to increase the price of products/services (41.3%), and inflation (17.8%).

Expected pay awards in the 2008-09 pay round

 Anticipated level of 2008-09 pay awards  All respondents  Manufacturing and production  Services
 0%-2.99% 15.8% 20.8% 13.6%
3% 22.1% 14.4% 25.5%
3.1%-3.99% 17.0% 13.6% 18.5%
4%-4.99% 27% 30.4% 25.5%
5% or more 17.8% 20.8% 16.4%

Source – IRS

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