PAY DATA
Wage freezes on the rise, but most firms award increases
New figures from Incomes Data Services show that pay settlement growth has fallen sharply. Data for the three months to the end of April 2009 reveal that settlements are running at 2% (as measured by median level), down from 3% in the previous quarter to March.
April is a key bargaining month, and the latest crop of settlements monitored by Incomes Data Services includes a large proportion of pay freezes. This is the main factor behind the sharp drop in the IDS headline measure.
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The figures are based on an analysis of 145 settlements effective in the three months to the end of April, altogether covering 2.2 million (mainly non-management) employees, in both the private and public sectors. Freezes made up almost a third of these settlements.
Key IDS statistics
While freezes are a key part of the picture, the majority of firms are awarding pay increases. Of the 75 new settlements monitored by IDS, a quarter are pay freezes.
There continue to be some sectoral differences, with freezes common in manufacturing, but less so in areas such as finance. Here, pay freezes have been a rarity so far in 2009, with most finance sector settlements in a range from 2.5% to 3.5%.
A fifth of the new deals are above 3%, in a range up to 5%.
A separate analysis of management pay deals, conducted by the research staff of IDS Executive Compensation Review, shows that the average pay award for managers in the private sector was just 1% for the three months to April. This is down sharply on the previous quarterly analysis, for the three months to January, which showed an average increase of 2.4%. Again, a record proportion of pay freezes is the key factor behind the drop in the average.
A final word
“Following the ‘delayering’ of the early 1990s recession, few firms have much spare capacity left to cut. As a result, many organisations are seeking to minimise redundancies and hang onto staff in the hope of an economic recovery. In this context, pay freezes, and even temporary pay cuts such as that recently agreed at Honda, are part of a strategy to avoid redundancies wherever possible. In those parts of the economy most affected by recession, the focus is on negotiation to mitigate its effects. And the contrast with finance shows that pay freezes aren’t the whole picture. If anything, the idea that most private sector firms are freezing or cutting pay is a current form of urban myth.” - Ken Mulkearn, Editor of IDS Pay Report.
“This quarter’s [management pay] figures are characterised by a high proportion of pay freezes, although it is not clear whether this is a fully accurate reflection of events or more a product of employers’ willingness to share this information. What is clear however, is that with or without pay freezes, employers are bearing down hard on pay budgets for managers as they attempt to ride out the recession.” - Steve Tatton, Editor of IDS Executive Compensation Review.
Want to know more?
Title: “Pay settlement analysis”, IDS Pay Report 1026, June 2009.
Availability: This fortnightly journal is available on a subscription basis; tel: 020 7429 6800 or order online at www.incomesdata.co.uk.
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 information visit www.incomesdata.co.uk.