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Stuart Gentle Publisher at Onrec

Pay is increasing by just 2%

The median annual basic pay increase awarded by organisations across the economy in the three months to the end of October 2014 was worth just 2%. The latest figures from pay analysts at XpertHR mark yet another period of subdued increases for employees

The median annual basic pay increase awarded by organisations across the economy in the three months to the end of October 2014 was worth just 2%. The latest figures from pay analysts at XpertHR mark yet another period of subdued increases for employees.

Pay awards effective in the first few months of the year were worth closer to 2.5%, but since April, each quarterly reading has shown pay increases in the region of just 2%. The latest figures mean that pay rises are worth less than the prevailing rate of inflation, with retail prices index (RPI) - the most commonly used inflation measure against which pay settlement levels are compared - at 2.3% in October 2014.

The 2% median pay rise is also below the 3% increase in the national minimum wage that took effect from 1 October 2014.

At this stage, employers are not optimistic that there will be an upturn in the level of pay awards over the coming months either. In a recent survey by XpertHR, 282 private-sector organisations said they expect to award employees a median 2% pay rise over the year to the end of August 2015, no higher than the pay rises that have been recorded for the majority of the past year.

Other key findings from the latest quarterly analysis of pay settlements include:

  • The middle half of pay awards effective in the three months to 31 October are worth between 1% and 2.4%.
  • Within the private sector, manufacturing-and-production companies continue to offer higher pay rises - at a median 2.3% - than those operating in private-sector services, where pay awards are typically worth 2%.
  • Pay freezes account for more than one pay award in 10, demonstrating that the period of pay restraint is far from over.
  • Pay awards in the public sector were worth a median 1.5% in the 12 months to the end of October 2014, compared with 2% in the private sector over the same period.

XpertHR Pay and Benefits editor Sheila Attwood said:

"The latest data marks yet another period of low pay awards recorded by XpertHR. A 2% pay increase for employees is worth less than the current rate of increase in prices. The fact that employers are predicting more of the same for the year ahead will not be welcome news for employees."