Pay awards for 2014 improve, but still below inflation

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The Office for Budget Responsibility may have revised its economic forecasts upwards for 2014 and 2015, but data from XpertHR reveals that this will not necessarily be reflected in pay awards.

XpertHR’s latest research found that only one-third of employers plan to offer a pay award worth the same or more than retail prices index (RPI) inflation between now and the end of February 2015.

XpertHR pay and benefits editor Sheila Attwood said: “Employers have told us that the key factor determining the level of their pay award is company performance/ability to pay. However, until the economy picks up significantly employers are not going to return to using inflation as the key benchmark against which to set their pay awards.”

The median pay award prediction for private-sector employers was 2.5%, while RPI inflation is forecast to be at or above 2.8% over the year. Public-sector employers are still covered by the Government’s 1% average pay award policy.

But while these figures do not compare favourably with inflation, they paint a more positive picture than this time last year – when the median pay award stood at around 2%.

There was some differentiation between sectors, with manufacturing and production recording a higher median pay award (at 2.5%) than the services sector (2.3%).

Encouragingly, the proportion of organisations imposing a pay freeze has fallen to less than 10%, according to the research.

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