Pay awards slump to just 1% in private sector

Pay awards for private sector employees are running at just 1%, according to data published by Personnel Today’s paid-for sister service XpertHR.

The latest figures, based on analysis of 46 pay awards covering 228,557 employees, show that over the three months to 31 July 2009, the median basic pay award was 1%. Revised figures for the three months to the end of May and June show a 0% and 0.5% pay award respectively, demonstrating the extent to which pay freezes have been used (see graph).

Four in 10 (41.3%) awards were pay freezes this quarter. However, no pay cuts were recorded.

Sarah Welfare, XpertHR pay and benefits editor, said: “All the evidence suggests that pay awards will remain subdued for the rest of 2009. With rising unemployment, a low minimum wage rise due in October, and headline inflation in negative territory, the chances of higher pay rises for employees in the near future will be slim.”

However, Welfare added that the public sector was still shaping up far better than the private sector during the recession. Data captured by XpertHR over the year to July 2009 showed public sector pay settlements were running at 2.3%, down from 2.5% in the year to June.

“With inflation negative and unemployment rising, there are no signs of pay deals improving in the near future. But for many public sector workers, such as teachers or NHS workers, the next pay rise is secured by a long-term deal, while in the private sector pay freezes continue to proliferate.”

The Labour Market Statistics unemployment data, out last week, also revealed average earnings in the public sector went up by 0.3 percentage points to 3.7%, excluding bonuses. In contrast, private sector average earnings slumped by 0.3 percentage points to 2.1% excluding bonuses (see graph).

However, Charles Cotton, reward adviser at the Chartered Institute of Personnel and Development (CIPD), said: “Sooner of later, the big pay chill would spread into the public sector.”

Alan Downey, partner and head of public sector at professional services firm KPMG, added: “Up to now, the private sector has borne the brunt of the recession, but financial pressure is starting to build in the public sector.

“Salaries represent a sizeable proportion of total public expenditure, and it is not surprising that employers are starting to squeeze the pay bill. While public servants may not welcome this move, the good news is that it should reduce the number of job losses that will be required.”

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