Pay awards continue to run well above inflation, but the value of pay settlements has dropped slightly as living costs begin to stabilise.
The median basic pay award in the three months to the end of April 2024 – the busiest pay review period of the year – was 4.9%, 0.3 percentage points higher than the previous rolling quarter, data from Brightmine has revealed.
However, the latest figure falls slightly below the median pay settlement for the previous 12-month period, which was 5%, suggesting that the deals reached in the last few months have been consistently lower than the awards seen in 2023.
Despite this, pay awards remain well above inflation. The consumer price index including owner occupiers’ housing costs (CPIH) rose by 3.0% in the 12 months to April 2024, down from 3.8% in the 12 months to March, largely driven by falling energy costs.
Pay awards and inflation April 2024
Real wages accelerate despite productivity falls
Starting salaries grow at a faster pace
Less than a third to award above-inflation pay rises in 2024
The retail price index (RPI), the measure of inflation used by trade unions in their pay negotiations, was 3.3%.
Official April 2024 labour market figures recently showed that real wages excluding bonuses rose 1.9% in the year to December 2023 to February 2024.
Sheila Attwood, Brightmine’s senior content manager for data and HR insights, said: “We have seen a noticeable drop in the level of pay awards since last year – from 6% in 2023 to just under 5% in the first quarter of 2024. However, we are now noticing some stability, as the first April settlements are also centred on this level.
“We are continuing to see a minority of organisations offering different awards to different groups of employees, typically based on salary, indicating that measures to help the lowest paid with the cost of living have not completely disappeared.”
Brightmine’s analysis of 102 pay settlements covering 355,064 employees that took effect between 1 February and 30 April 2024 found little variation in the basic awards given by employers. However, 52% of deals were worth less than the award given to the same employee group in 2023, and 4.9% resulted in a pay freeze.
Although many employees would be relieved that inflation had fallen, Ben Harrison, director of the Work Foundation think-tank at Lancaster University, noted that the 2.3% CPI figure (which does not include housing costs) was still well above the 2.0% target the government and the Bank of England are hoping to achieve this year.
“The truth is the worst cost of living crisis for more than 40 years is not yet over – most workers continue to face energy, food and housing costs that are much higher than three years ago. The sting in the tail is interest rates remain at a 16-year high of 5.25%. And while there is no guarantee the Bank of England will cut interest rates soon, low-paid and insecure workers are particularly exposed to record private rent increases and higher mortgage payments,” he said.
The truth is the worst cost of living crisis for more than 40 years is not yet over – most workers continue to face energy, food and housing costs that are much higher than three years ago.” – Ben Harrison, Work Foundation
“Yet despite the challenges many workers face, it appears cost-of-living support from businesses and government is winding down. Recent Work Foundation research found that only 30% of UK businesses are planning above-inflation wage rises in 2024. Meanwhile, the government’s Household Support Fund is due to expire at the end of September.
“Inflation remaining above target should act as a reminder to government ministers that now is not the time to become complacent. They should commit to extending cost-of-living support for those most in need until April 2026 when the Office for Budget Responsibility forecasts real wages will have finally returned to 2008 levels.”
Inflation has had an impact on employees’ pensions, said Lily Megson, policy director at My Pension Expert.
“Soaring prices and household bills have made it a nightmare to save for retirement, meaning many are not putting anywhere near enough into their pension pot,” she said.
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“The government must recognise that figures like today’s do not mean the fight for financial security is over – far from it. Instead, they should work to collaborate with the financial services sector to prioritise financial education and accessible advice for all. Not only does this enable people to take control of their financial futures, but it makes sure that all benefit from an economy in recovery.”
