With retail prices index inflation falling this month (to 3.3%), the shortfall between wage and price rises has dropped to 0.8 percentage points. However, the 21-month run of pay awards being worth less than inflation continues – pay awards have not been worth more than inflation since August 2016.
Our headline measure of pay awards has not been higher than 2.5% since December 2008. Among our current sample, the most common pay award is 2% (awarded in 19.2% of cases) followed by 3% (12.3%). Only a handful of deals saw employee pay frozen, while at the other end of the scale a number of organisations’ deals reflect either the 4.4% increase in the national living wage, or the 3.5% increase in the living wage outside of London as used by the Living Wage Foundation.
Latest pay award findings
Based on a sample of 219 pay awards from across the economy effective between 1 March and 31 May 2018, we find that:
- The median pay award made by employers was 2.5%.
- A quarter of pay deals were worth 2% or less, while a quarter were worth 3.1% or more - the highest this latter figure has been since February 2009.
- Manufacturers made pay awards at a median 3%, compared with 2.5% among private-sector services firms.
- Pay awards continue to compare favourably against last year, with 60.1% of a matched sample of awards worth more than employees received this time last year. Just 14.1% of pay awards are lower than a year ago.
Over the 12 months to the end of May 2018 the median pay award in the private sector was 2.5%, compared with 1.3% in the public sector. However, very few 2018 public sector pay awards have been recorded due to the delay in publication of the civil service pay guidance and the pay review body reports.
XpertHR pay and benefits editor Sheila Attwood said:
“Despite hopes that pay rises are finally catching up with inflation, our latest figures shows that there is still a significant gap between the two. Prices have outstripped pay awards in every month since September 2016, and continue to do so. With pay awards now appearing to have settled in to a new norm of 2.5%, employees are going to continue to become worse off in real terms unless inflation falls further.”