Pay awards overtake inflation for first time in more than two years

Pay awards have overtaken inflation for the first time in more than two-and-a-half years, offering UK workers a little festive cheer among the gathering economic gloom, according to pay specialists Industrial Relations Services (IRS). 
 
The median basic pay award in the three months to the end of November 2008 was worth 3.8%, while the equivalent figure for inflation was 3%.
 
However, the report suggested that once the new pay bargaining year gets underway in January 2009, many employers are likely to find their ability to award above-inflation pay awards severely affected by the full impact of the recession.
 
Pay awards in the public sector continue to bunch around 2.5%. The median basic pay award in the 12 months to the end of November 2008 is 3.5%, with half of all awards worth between 2.5% and 2.8%.
 
IRS Pay and Benefits editor, Sheila Attwood said: “It will be welcome news for employees to see that their pay rises are finally worth more than inflation. However, with the economic situation worsening, and disposable incomes already severely stretch, it is unlikely to put a lot of extra money in people’s pockets.
 
“Inflation is forecast to fall considerably in 2009, and there is no doubt that pay settlements will, to some extent, follow suit.”
 
The findings were based on an analysis of 79 pay settlements awarding an across-the-board settlement to all employees.

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