2.5% pay award is new norm

Employers are predicting that pay awards in 2018 will be at their highest level in almost four years, according to latest data from XpertHR. Private sector organisations expect to make a 2.5% award over the coming year, compared with a median increase of 2% in the previous 12 months.

• However, the most common pay award predicted is 2%, with almost three in ten forecasted settlements at this level.
• One third of employers expect to award a higher increase this year than last, the highest proportion recorded by XpertHR since 2011.
• Pressure for higher awards is coming from familiar places, including what other organisations are paying, recruitment and retention issues and inflation.

In the three months to the end of February, the median settlement recorded by XpertHR stood at 2.5% with 57% of awards being higher than the previous settlement.

XpertHR’s Sheila Atwood said:

‘It is several years since employers have been so optimistic about prospects for pay rises. If private sector pay awards stick at 2.5% over the course of the year, this will mark the first time since 2012 that increases have been consistently above 2%.’

Meanwhile, a second pay analyst, Incomes Data Research (IDR), reports a median pay award of 2.5% for the three months to January 2018. The latest figures are based on 50 settlements, covering almost 330,000 employees in total. Most of the awards are effective from January, and most are in the private sector, with a small proportion at not-for-profit organisations.

Ken Mulkearn, editor of IDR Pay Climate, said:

‘Our latest figures suggest that the pay growth we saw in the private sector in the three months to October 2017 has continued into 2018. This is closely linked to the rise in inflation since then, and the future path of the cost of living will be a crucial determinant of pay growth.’