Pay awards rise by 2.9%

After just one month at 2.8%, basic pay settlements have already bounced back to 2.9%. Employees receiving performance-related awards fare slightly better, with a pay bill increase of 3%, according to the pay analysts IRS (Industrial Relations Services), part of LexisNexis.

The IRS Pay Databank headline measure of basic pay settlements - as recorded by the median, or midpoint in the range (see notes to editors) - stood as 2.9% in the three months to May 2004. This is unchanged from the revised figure for the three months to April 2004.
As predicted by IRS, the fall in pay settlements to 2.8% in the three months to April was only temporary and has already recovered. Revised figures for the quarter to April now also put pay awards at 2.9%.

Other key findings include:

Pay awards tightly bunched. The spread of pay awards remains unchanged on the previous quarter, with half of all basic pay settlements falling between 2.5% and 3%.

Public sector pay growth steady. Public sector pay settlements in the 12 months to May 2004 remain at 3%. Over the same period, private sector awards also stood at 3%.

Gap between manufacturing and services sectors widens. Pay awards in the manufacturing sector remain steady at 3% in the three months to May, unchanged from the revised figure for April. Meanwhile the services sector suffered another blow as pay awards fell from 2.8% in April to 2.7% in May.

Pay deals remain lower than a year ago. Among a matched sample of 97 pay settlements effective from 1 March to 31 May 2004, for which we also collected data on the 2003 pay award, almost half (48%) are lower than a year ago. However, more than one-third (38%) were higher, and 14% received the same pay award in both years.

In the nine months to end May 2004, the median pay bill increase for organisations awarding performance-related pay rises was 3%, slightly above the basic increase median of 2.9%. The range of pay bill increases is spread from 1% to 7%, with actual pay increases awarded to staff ranging from 1% to 25.6%.

IRS Pay and Benefits editor, Sheila Attwood said:

Employers continue to exercise restraint in the pay field, with pay awards at 2.9% for the second rolling quarter. Looking ahead, we expect pay settlements to nudge upwards, following the path of headline inflation. However, ability to pay remains a key constraint for employers and employees should not expect pay rises to jump above 3%.î