Private sector set for modest pay increases

Employers
are less confident than a year ago about their ability to keep a lid on pay
rises in the forthcoming wage round, according to research published today by
IRS.

The
IRS Employment Review annual Pay Prospects Survey 2002, now in its fourteenth
year, reveals that a modest upward movement in private sector pay settlements
is likely in the 2002/03 pay round. From the current level of 2.5 per cent, the
scale of this shift will be small, however, with the median settlement likely
to edge up towards 3 per cent during 2003.

This
year’s survey of pay prospects is set amid a mixed economic climate – while the
manufacturing sector is still in recession, much of the service sector has
recovered from the weakness of a year ago: employment levels are high and stable,
while inflation and interest rates are low, and the public finances remain in
good shape.   

The
key findings of the research 
conducted during September 2002 – are based on 241 responses from managers
across the private sector. These include: 

Pay
Prospects    


Almost one quarter (22.6 per cent) of employers expect to award a pay rise that
exceeds the previous one, compared to just one in 10 a year ago. 


The proportion forecasting ‘no change’ in their forthcoming deal is similar to
that of a year ago, while just one in five now expect to award a lower deal –
down from 35.7 per cent last year.            


Manufacturers are more likely to award a higher settlement than service sector
organisations. 

Key
influences on pay


Company performance and the rate of inflation remain the two most important
factors likely to influence the forthcoming pay round.

  Comparability with industry pay levels
remains an important influence, while recruitment and retention issues are
considered to be less significant than a year ago.                

Reward
strategies


Provision of stakeholder pensions is now more widespread.  More than a quarter of respondents now offer
stakeholder pensions, compared to just 22.6 per cent last year.

Pay
and benefits editor for IRS Employment Review, David Carr said: “Looking into
2003, and provided there are no significant adverse shocks from such things as
an oil price spike, the picture is one of a gradual upturn in UK economic
growth, a continued high level of employment and a moderate pick-up in the rate
of inflation.  

"Settlements
have remained restrained in recent months, at close to the 2.5 per cent level
of rising inflation. This pressure may increase towards the middle of next year
and both employees and employers are well aware of this.”

By Quentin Reade

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