This is the sixth consecutive rolling quarter that pay awards have stood at 2%. Although this is an improvement on the rate of increase seen over the autumn 2016 months, it continues to demonstrate the lack of movement back to pay award levels from before the recession. In the run-up to 2009, pay awards rose from several years at 3%, up to 3.5% and beyond. Before the recession, the last time pay awards were at 2% for any length of time was in the second half of 1993.
The weakness in pay awards is exacerbated for employees by the widening gap between pay rises and inflation. On the retail prices index (RPI) measure, inflation stood at 3.7% in May 2017, 1.7 percentage points above pay awards. Many commentators expect RPI to keep on rising, putting the pay squeeze for employees firmly in centre stage.
Based on a sample of 260 pay awards from across the economy effective between 1 March and 31 May 2017 (covering the pay awards for almost 3.3 million employees), we find that:
- half of all pay awards are worth between 1.5% and 2.5%;
- 2% is the most common pay award, given to 28.5% of employee groups;
- a 2% pay award was recorded in the services, and manufacturing and production sectors;
- four pay awards in 10 (42.2%) are higher than employees received a year ago, with one-third (33.2%) lower; and
- the number of pay reviews resulting in a pay freeze remains low, at just 4.8%.
XpertHR pay and benefits editor Sheila Attwood said:
“With inflation wiping out the value of many pay awards, employees are facing on ongoing pay squeeze. Although employers are making positive moves to address this – through not freezing pay, and giving higher awards than last year – there is still little sign that employees will start receiving more than 2% at their annual pay review.”