Pay freezes become the median basic pay settlement

Pay freezes are set to dominate 2010, as research shows more employers are continuing to put salary increases on hold.

The monthly pay intelligence survey by IRS, published exclusively by XpertHR, found the median pay award in the three months to January 2010 was 0% – down from 1.2% in the previous quarter.

When performance-based pay rises were included in the analysis, almost half (48%) of the 80 deals surveyed represented a freeze in pay. This was up from 34% recorded for the three months to December 2009.

Of the 62 pay awards that were surveyed in both January 2009 and 2010, the vast majority (73%) had dropped in value, while 13% were the same and 14% had increased.

Sarah Welfare, XpertHR pay and benefits editor, said: “We are seeing a new round of pay freezes in 2010, with some employers freezing pay rates for the first time since the recession began.

“With headline inflation shooting up, this will inevitably put pressure on pay settlements as employees seek at least to match pay increases to inflation. But so far, employers seem to be resisting this pressure, faced with such uncertainty over the economic recovery.”

Pay settlements in the manufacturing sector showed no sign of improvement, with the median pay deal remaining unchanged at a pay freeze since April 2009.

The median pay award for the services sector also dropped to zero from 2% in the three months to December.

In the year to January, the Retail Prices Index (RPI) rose to 3.7%, up from 2.4% in year to December, while the Consumer Prices Index (CPI) increased by 0.6% to 3.5%.

On Wednesday, the Chartered Institute of Personnel and Development warned employers should be wary of setting pay awards based on rising inflation, which could become unsustainable.

Further information on inflation and earning statistics can be found on the XpertHR website.

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