Pay rises dip to 2.8%

UK pay settlements have finally broken the mould of the past year and have dipped below the 3% mark for the first time since March 2003, according to the independent pay analysts IRS (Industrial Relations Services), part of LexisNexis UK.

The latest IRS research reveals that the median basic pay award in the three months to April 2004 was 2.8%. This represents a fall of 0.2 percentage points from the 3% rise recorded in each of the 12 previous rolling quarters.

The majority of pay settlements in the IRS analysis take effect in April. Analysis of this group of 39 pay awards alone reveals that the median pay award is 2.9%, suggesting that this monthís fall to 2.8% is a temporary blip that will be corrected as further deals in the busy month of April are concluded.

Other key findings include:
Interquartile range narrows. Pay awards in the three months to April are more tightly bunched than in the previous rolling quarter. The upper quartile, marking the cut-off point for the top 25% of pay awards, has fallen by half a percentage point to 3%. Meanwhile, the lower quartile - marking the bottom 25% of pay awards - fell by 0.3 percentage points to 2.5%.
Public sector pay growth slows. Basic pay awards in the public sector remain above those in the whole economy. However, as a result of the review body recommendations, accepted in full by the government, pay awards have fallen from the 3.5% plateau seen in each of the previous 12 rolling years. Pay awards in the sector stood at 3% in the 12 months to April 2004.
Weighted median falls. As a result of a series of below-inflation awards to large groups of public sector employees, the weighted median - that takes into account the number of employees covered by each pay deal - has fallen to 2.5% in April 2004, down from 3% in March.
Manufacturing and services sectors also feel the pinch. Pay awards in both the manufacturing and services sectors have also fallen. In the three months to April 2004, the median pay award in the manufacturing sector fell 0.1 percentage point to 2.9%, while services sector awards fell by 0.2 percentage points to 2.8%.
Pay deals lower than a year ago. Analysis of a matched sample of pay deals (for which IRS has collected information in both 2003 and 2004) reveals that pay awards concluded in the three months to April 2004 are lower than those made a year ago. Among a matched sample of 52 organisations, more than half (52%) awarded a lower rise in the latest pay round, a third (37%) made a higher award and just one-tenth (11%) awarded the same pay rise in both years.

IRS Pay and Benefits editor, Sheila Attwood said:

ìThese latest figures should be treated with a degree of caution as many of the pay deals due to be concluded in April have yet to settle. Against expectations, headline inflation fell by 0.1 percentage point to 2.5% in April 2004. However, this downturn is unlikely to be repeated next month, and coupled with high employment, is likely to translate to more April deals settling closer to the 3% mark.

ìApril also marks the beginning of the public sector wage round-up for the year. Above inflation awards over the past year had helped to keep pay settlements buoyant, but the key groups covered by the pay review bodies - including teachers, the armed forces, senior civil servants and the prison service - received awards of less than 3%. In the 12 months to April 2004, pay awards in the public sector rose by a median of 3%, down from the 3.5% recorded in each of the previous 12 months.î