Pay deal levels creep up with inflation

Inflation is spurring higher pay deals this summer with three-quarters of them being struck at 3 per cent or above and 4 per cent set to become the norm by the end of the year.

Incomes Data Services analysed 566 pay settlements negotiated this year and found a marked rise in more recent deals from those struck in the first quarter.

Because pay planning often takes place in September – when last year inflation was as low as 1.1 per cent – it had the effect of subduing this year’s early settlements.

With inflation hitting 3.3 per cent in June, settlements are likely to reflect this level, or rise slightly over the next few months.

IDS predicts inflation-linked increases in long-term deals where rises of 3.8 to 4 per cent will be triggered by formulas such as “inflation plus 0.5 per cent”.

Notable settlements included in the report are those at the BBC (3 per cent), Tesco (3.1 per cent) and Marks & Spencer (2.5 per cent plus profit share of 2.5 per cent). Railtrack, meanwhile, struck one of the bigger deals in April where basic pay was set to rise by 9 per cent – although 4 per cent was down to consolidation of roster premiums.

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