It is now more than three years since pay awards have been worth more than 2% - and more than eight years since they have been at 3% or higher. Pay awards are also settling in below the rate of retail prices index (RPI) inflation. With RPI at 3.5% in April 2017, we now see the largest negative gap between the two indicators since December 2011.
However, there are also some more positive signs on the pay front, including a record low number of pay freezes and higher pay awards at the top of the range.
Based on a sample of 179 pay awards from across the economy effective between 1 February and 30 April 2017, 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 26.3% of employee groups;
- a 2% pay award was recorded in the services, and manufacturing and production sectors. While this marks the sixth consecutive rolling quarter of pay awards at this level in the manufacturing-and-production sector, it is the first time since December 2016 that service sector deals have reached this level;
- almost half (45.7%) of pay awards are higher than employees receive a year ago, with less than one-third (31.8%) lower; and
- the number of pay reviews resulting in a pay freeze is at the lowest level for several years, at just 4.5%.
April sees the first public-sector pay awards of 2017 take effect, which once again this year highlights the divergence in pay award levels between the public and private sectors. Many of the most prominent deals in the public sector – such as those for the pay review body groups including the NHS, Armed Forces and Prison Service – remain focused on a 1% pay award. But in the private sector 2% is the benchmark pay award, having been made in 28% of pay reviews over the last three months.
XpertHR pay and benefits editor Sheila Attwood said:
“Despite some positive signs on pay awards over the last rolling quarter, such is the prevalence of the 2% pay award that we would need a considerable number of higher (or lower) pay awards to pull off a shift in the median from this level. Our feeling is that this won’t happen in the short term.”