Pay settlements rise as employers reward staff loyalty

Pay awards concluded in January 2011 are worth more than those for the same period in 2010, according to research published today.

According to data from XpertHR, in the second half of 2010 pay awards stood at a median 2% increase. But examination of pay deals effective in January 2011 reveals that the median pay rise has risen to 2.5%. This is now 2.2 percentage points higher than the median 0.3% pay increase recorded in the three months to January 2010.

The analysis suggests that employers are starting to reward employees for their loyalty following two difficult years. Several employers surveyed said that employees were not surprised by pay freezes during 2009 and 2010, but that they would be “very unhappy” with another year without an increase. Almost two-thirds of pay awards recorded for January 2011 are higher than those awarded to the same group of employees one year ago.

However, the picture of pay awards differs vastly between the public and private sectors. All of the January pay awards recorded by the survey so far are in the private sector. In the public sector, employees earning more than £21,000 per year will be subject to a pay freeze this year, while those earning below this level will receive a £250 flat-rate rise, worth less than 2% for the lowest paid.

According to XpertHR, while employees will welcome the news that higher pay rises are a possibility this year, rising inflation will eat away at the value of any increases. Few employees can expect to receive a “real terms” increase in pay, as RPI inflation – the key benchmark for pay awards – is currently at 4.8%, 2.3 percentage points above the value of pay rises.

XpertHR pay and benefits editor Sheila Attwood said: “We are finally seeing signs that the level of pay awards is picking up. 2010 was characterised by the sheer number of pay freezes made, with almost three in 10 organisations refusing employees a pay rise. Not only has the median pay award now risen to 2.5%, but we have only a couple of pay freezes recorded for January 2011. There are real signs that private sector employers will be making higher pay awards in 2011.

“In contrast, public sector workers are facing a less than 2% rise at best, with many having their pay frozen in 2011.”

XpertHR pay trends for January 2011 in full.

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