UK heading for fourth consecutive year of below-inflation pay awards

PAY DATA

UK heading for fourth consecutive year of below-inflation pay awards

Settlements look set to lag behind RPI inflation for a fourth consecutive year, according to pay specialists XpertHR.

Since the beginning of 2010, the XpertHR measure of pay awards – the median basic pay settlement across the whole economy – has been worth less than retail prices index (RPI) inflation.

Covering the three months to the end of May 2013, the latest analysis shows median basic pay award at just 2%. The RPI stood at 3.1% in May 2013 and is forecast to remain above 3% during the second half of 2013.

Meanwhile, the proportion of pay awards resulting in a pay freeze continues to fall and now stands at just under one in ten.

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According to XpertHR research: “Employers are predicting a median 2.5% pay award over 2013 as a whole, and with no signs of an immediate, or sustained, pick-up in the level of pay awards, employees are facing the real prospect of a fourth consecutive year of pay awards falling behind inflation. This represents a real terms pay cut as any pay increase is cancelled out by prices rising at a faster rate.”

Key pay statistics

XpertHR recorded details of 262 pay awards effective in the three months to the end of May 2013, covering more than 2 million employees. Of these, 193 provide an identifiable increase in the lowest adult rate of pay, and form the sample for the main analysis. The median figures are as follows:

• Whole-economy settlements are pitched at 2%.
• Pay awards among manufacturing companies (2.5%) are notably above the rate in the service sector (1.9%).

A final word

"The combination of subdued pay awards and elevated inflation will leave many employees out of pocket for yet another year. Employers are continuing to exercise caution when it comes to reviewing their pay bills, and we see no sign of a sustained upturn in pay settlement levels this year." - Sheila Attwood, XpertHR, Pay and Benefits.

Want to know more?

The pay award statistics are based on the “largest sample of pay deals collected in the UK – every year XpertHR collects details of in excess of 1,600 pay settlements”.

XpertHR is the “UK's most comprehensive online source of legal compliance, good practice and benchmarking information made available to HR professionals as a single subscription service.” For more information visit www.xperthr.co.uk.