Proportion of pay freezes continues to fall


Proportion of pay freezes continues to fall

The majority of employers across all sectors of the UK economy continue to award pay increases between 2% and 3%, according to the latest analysis of settlements from Meanwhile, the proportion of organisations freezing pay has dropped below one in ten of all awards during the three months to October 2010, the lowest figure since the end of 2008.

The overall IDS measure of settlements (the median level of pay award for the whole economy) remains unchanged at 2%.


Low-paying sectors

The latest IDS analysis covers the three months to the end of October, and contains a high proportion of organisations that time their annual reviews to coincide with the annual uprating of the national minimum wage.

IDS said: “These tend to be in lower-paying sectors where a significant number of staff are paid at or close to the minimum wage, such as the retail sector. The increase of 2.2% to the minimum wage was an influence on the overall level of pay awards in low-paying sectors, although increases also reflect the overall trend in pay reviews. A number of larger retailers chose to pay increases above the level of the increase to the minimum wage, in order to maintain a gap between their lowest rates and the statutory minimum, and avoid being seen as ‘minimum wage employers’.”

Looking ahead

January is an important month in pay setting calendar. For organisations looking ahead to their 2011 pay negotiations, IDS reckons 3% is beginning to emerge as a potential key figure.

IDS said: “Inflation, particularly the RPI measure, continues to rank a close second to the business outlook as a factor in pay setting. The Bank of England expects CPI inflation to remain above the 2% target in 2011, while RPI inflation, which is much more commonly used in wage setting is likely to remain higher still. Leading City economists currently predict that RPI inflation will stay above 4% for the first quarter of 2011.”

Summary of key settlement data

For the three months to the end of October 2010, based on 69 settlements covering 1,873,538 employees in total, the key IDS statistics are these:

  • Whole economy median: 2.0%

  • Whole economy average: 2.1%

  • Whole economy inter-quartile range: 1.9% to 2.5%

  • Manufacturing and production median: 2.4%

  • Private services median: 2.0%

  • Public sector median: 2.0%

A final word

“As we prepare to turn the corner into 2011, there are a number of competing pressures - both upward and downward - on pay. Affordability and cost pressures loom large, but inflation is likely to increase in importance as employees’ energy bills rise, rail fares rise and the increase in VAT comes into effect in January.” - Ken Mulkearn, editor of IDS Pay Report, whose staff collect and analyse the pay settlement data for

Want to know more? is an online source of all the remuneration data collected by IDS, on pay settlements, pay levels and executive compensation. Visit

IDS Pay Report, published fortnightly, is the “UK's leading source of research and analysis on pay and benefits across the economy”.

Incomes Data Services is the “leading UK information and research service on employment issues, providing a range of publications for employers, trade unions, government departments and other agencies”. For more details visit