Pay deals still low despite high inflation

Pay awards in both the private and public sectors remain low despite high headline inflation, according to the latest research from IRS, published exclusively on XpertHR.

Analysis shows that pay awards were worth a median 1% in the three months to the end of July 2010 – four percentage points below the cost of living as measured by retail prices index (RPI) inflation, which was 5% in June.

Pay freezes were still common, making up almost four in 10 (38%) of the total sample of 226 wage deals. But the majority of these (58%) were in the public and not-for-profit sectors, a reversal of the position this time last year when most freezes were in private sector firms and just 6.5% covered public or not-for-profit sector employee groups.

Other key findings (based on 182 basic pay deals) reveal that:

  • the interquartile range (the 50% of deals between the lower and upper quartile) for the whole economy is unchanged at nil to 2%, where it has stood since the three months to January 2009;
  • there are some signs of recovery in the manufacturing sector, where basic deals were worth a median 2% in the three months to June 2010, compared with a median pay freeze for services (including public services);
  • both private and public sector deals were pitched at a median 1% over the 12-month period to June 2010.

Sarah Welfare, XpertHR’s pay and benefits editor, said: “For the public sector, it is clear that further pain is around the corner once the Government’s two-year pay freeze for all but the lowest-paid employees kicks in.

“But for private sector employees the outlook is less clear. So far this year, the uncertainty of the economic outlook and weak labour market seem to be counterbalancing high inflation as influences on private sector pay deals.”

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