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Lowest paid will see highest pay rises

The lowest paid workers are likely to receive pay awards more than twice as high as other employees over the coming year, according to pay analysts at XpertHR.

Chancellor Philip Hammond’s Budget announcement that the national living wage will increase by 4.4% to £7.83 an hour from 1 April 2018 will provide a welcome wages boost to affected employees (those aged 25 and over). Employees not subject to the minimum wage rates, however, can expect pay rises in the region of 2% next year, research by XpertHR has found.

Workers covered by the minimum wage are also likely to be some of the only ones seeing their pay increase by more than inflation. On the retail prices index measure, the current 4% rise in prices is double the value of the pay awards monitored by XpertHR, but below the increases to the national living wage (4.4%) and the national minimum wage for 21 to 24 year olds (4.7%) from next April.

Latest pay award findings

The predicted 2% pay rise over the next year matches the current pattern of pay setting, with employers awarding their staff a median 2% pay rise over the past three months. Based on a sample of 45 basic pay awards effective between 1 August and 31 October 2017, we find that:

  • The median pay award across the whole economy is 2%, with the middle half of pay awards (the interquartile range) worth between 1% and 2.4%.
  • While only a fifth (21.6%) of pay awards were lower than the award received by the same group of employees last year, the majority (54.1%) were the same. One-quarter (24.3%) of awards were higher than the employee’s previous increase.
  • [Within the private sector, the 2% figure is recorded for pay awards in both manufacturing-and-production organisations and in private-sector services firms.

Over the 12 months to the end of October 2017, the median pay award in the private sector is 2%, compared with 1% in the public sector.

XpertHR pay and benefits editor Sheila Attwood said:

“The 4.4% pay rise is good news for employees paid the national living wage, but may put pressure on pay budgets as many organisations are planning for a 2% pay rise across their workforce more generally.”