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Pay awards sink further below inflation

The median basic pay award is 2% in the three months to the end of August 2017, according to the latest data from pay analysts at XpertHR.

With inflation on the retail prices index (RPI) measure reaching 3.9% in August 2017 (its highest level since January 2012), prices are now rising nearly twice as fast as pay.

Over the past 10 years (since September 2007), RPI inflation has outstripped pay awards in 84 months, pay awards have outstripped inflation in 34 months and the measures have been on a par in two months. In the current period, pay awards have been worth less than RPI inflation since September 2016.

Based on CPI inflation, which has been lower than RPI in every month for the past 10 years except for the period between September 2008 and November 2009, pay awards have been worth less than inflation for 73 months (the same in two months and higher in 45).

Based on a sample of 84 pay awards from across the economy effective between 1 June and 31 August 2017 (covering the pay awards for almost 1.4 million employees), we find that:

  • 2% is the most common pay award, given to 27.4% of employee groups;
  • half of all pay awards are worth between 1.5% and 2.5%;
  • a 2% headline pay award was recorded in both the manufacturing and production services sectors; and
  • two-thirds of pay awards (36.9%) are higher than employees received a year ago, and a quarter (23.1%) are lower.

Over the past year, the public sector has recorded a median pay award of just 1%. However, police and prison officers have recently been awarded pay rises that the Government claims are above its 1% cap. In early September, Nicola Sturgeon pledged to lift the 1% pay cap on public-sector workers in Scotland next year, while 14 health unions have written to the Government calling for a fully funded 3.9% pay rise (in line with RPI inflation) with an extra consolidated £800 "to restore some of the pay lost over the past seven years". The Government is due to set out the remits for the pay review bodies later in the year.

XpertHR pay and benefits editor Sheila Attwood said:

“Public sector workers may well be in line for pay awards in excess of 1% over the coming year, but overall restraint remains across the economy and workers face a continued period of below-inflation pay increases.”