Pay awards back to 3%

UK pay deals are back at 3%, according to the latest figures from pay analysts IRS (Industrial Relations Services), part of LexisNexis.

As the UK enters the quieter period of pay bargaining over the summer months, the IRS pay databank measure of pay awards across the whole economy - the mid-point in the range of recorded deals - has risen to 3% for the three months ending July 2004.
The headline figures for the previous three rolling quarters - April, May and June this year - have also been revised upwards from 2.9% to 3%, as more settlements have been added to the IRS pay databank. This means that the IRS measure of pay settlements has remained at 3% for every rolling quarter since March 2003.

Other key findings include:

- Inflation matching pay awards. Now that pay awards have returned to 3%, they are matching the level of headline inflation, which means that employees are receiving a cost of living increase.

- Pay awards more widely spread. Half of all pay awards now fall within the range 2.5% to 3.5%. The upper quartile - above which the top 25% of awards lie - jumped by 0.5 percentage points to 3.5%. Meanwhile the lower quartile - below which 25% of settlements fall - remains steady, at 2.5%.

- Public and private sector pay growth even. The median pay award in both the public and private sectors is 3% in the 12 months to July 2004.

- Weighted median rises. The weighted median, which takes into account the number of people covered by each pay deal, has risen by 0.2 percentage points (on the revised June figure) to 3% in the three months to July 2004.

- Gap between manufacturing and services sectors reverses. In the quarter to July 2004, the IRS pay databank figures show a turn-around in the pattern between basic pay settlements in the manufacturing and services sectors. In the services sector, pay awards rose by a median 3%, 0.1 percentage point higher than the (revised) June figure of 2.9%. Manufacturing pay deals fell to 2.5%.

- Pay deals lower than a year ago. Analysis of a matched sample of pay deals, for which IRS has collected information on the latest and previous pay awards, reveals that exactly half are worth less this time round. Around one-third (32%) paid a higher settlement, which the remaining fifth (18%) received the same increase.

- Merit budgets match basic awards. A separate analysis of the 20 pay deals based on individual performance reveals that the median merit budget in the quarter to July 2004 was 3% on the paybill, the same as the median basic pay increase.

- Public sector pay: following the more subdued pay settlements awarded to the large public sector groups covered by the pay review bodies, IRS expects similar restraint in other key areas of the civil service as their pay bargaining gets under way.

- National Minimum Wage: several employers contacted by IRS are undertaking additional pay reviews this autumn to accommodate the rise in the national minimum wage (NMW). The NMW will increase by 7.8%, from 4.50 to 4.85 an hour on the adult rate, from 1 October 2004.

IRS Pay and Benefits editor, Sheila Attwood said:
ìAs pay awards for the three months to the end of July have nudged back up to 3%, from 2.9% in June, it will be interesting to see how private sector pay responds to the increase in headline inflation expected in the second half of the year.

ìMeanwhile, for public sector pay the picture is quite different. The single largest pay deal in the economy -covering 1.3 million local government employees - paid a below-trend 2.75% from 1 April 2004. If the rest of the public sector follows their lead, pay settlements here will be an enviable benchmark for private sector employers. However, bargaining in the sector has been slow to get off the ground this year, and it may be some time before we see a settlement picture emerging.î