Pay increases lowest since 2003

The headline rate of pay increases has fallen below 3% for the first time since March 2003, according to new monthly data from Personnel Today’s sister title IRS Employment Review.

An analysis in the latest issue of IRS Pay Intelligence shows that pay rises at the start of the 2006 bargaining round stood at 2.9%.

The findings cover a sample of 78 basic pay settlements in the quarter to January 2006 and provide a median (midpoint in the range) figure for whole economy pay.

Researchers at IRS also found that two-thirds (64%) of settlements in a matched sample analysis were lower than in the same quarter of last year. A quarter (24%) of settlements were worth more than the previous pay award.

Public and private sector pay deals continue to run in line with each other, both pitched at a median 3% increase in the 12 months to January 2006.

A separate analysis of long-term pay deals shows that inflation is a key determinant in long-term pay awards, with half of all long-term deals with a January anniversary date in the sample using an inflation-linked formula to set the 2006 pay award.

Sarah Welfare, researcher at IRS Pay Intelligence, said: “In the context of falling inflation over the course of 2005, our analysis provides further evidence of an easing of upward pay pressures during this key period in the pay bargaining calendar.

“Whereas in January 2005, employees covered by inflation-linked pay deals benefited from higher inflation during the latter quarter of 2004, this yearÕs January awards are influenced by falling RPI during the close of 2005.”

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