Another month of pay stability

UK pay deals seem to be stabilising as the median pay increase (the midpoint in the range) remains unchanged at 3% in the three months to the end of July 2005, according to the monthly research from pay analysts IRS (Industrial Relations Services), part of LexisNexis Butterworths.

However, while the median pay increase remains unchanged, their more in-depth look at UK pay figures reveals a more diverse range of pay increases being awarded, says IRS.

The number of pay deals at the higher end of the pay range has fallen. In the three months to 31 July 2005, 60% of basic pay awards were worth 3% or more, down from 69% in the three months to June 2005. The proportion of settlements paying increases of 3.5% or above has also seen a small fall from 22.5% to 19% in the latest IRS analysis.

IRS reveals that UK pay deals are no longer bunching around the median in the way that they have during the past few months. The lower quartile measure the point at or below which a quarter of pay deals lie has fallen to 2.5%, while the upper quartile rate (the level at which a quarter of pay deals are the same or higher) remains steady at 3.3%. Therefore, half of all pay deals now fall within the range 2.5% to 3.3%, a much wider spread than the 2.9% to 3.3% range recorded in the quarter to June 2005.

IRS pay databank other key findings include:

Lower quartile takes a tumble. The lower quartile the cut-off point for the lowest 25% of pay awards now stands at 2.5%, its lowest level since December last year.

Upper quartile measure steady. The upper quartile remains steady, at 3.3%, for the third consecutive month. Taken with the lower quartile measure, this means that half of all pay deals now fall within the range 2.5% to 3.3%, the widest spread of awards since December 2004.

Awards paying more than a year ago. The majority of employees still received a higher pay increase in their latest review than they received a year ago. The IRS analysis of a matched sample of pay awards reveals that 60% are higher than those received by the same group of employees a year ago; 24% showed a lower increase and the remaining 16% paid the same level of increase in both years.

Signs of easing pay pressure in private sector. While the median basic pay increase in both public and private sectors remains steady at 3% for the year to July 2005, both the lower and upper quartile measures for the private sector dipped, in the three months to July 2005.

Manufacturing and services unchanged. Pay awards in the manufacturing and services sectors also remain unchanged at 3% in the three months to July 2005.

Merit deals remain high. Pay rises based on individual or company performance that vary the level of increase received by each employee are analysed away from the basic, across-the-board pay settlements. In the three months to July 2005 a quarter of all pay deals were based wholly on merit-related rises. The median pay bill increase for this group of settlements was 3.5%, half a percentage point above the basic pay award.

IRS Pay and Benefits editor, Sheila Attwood said:

Our latest figures indicate that the basic pay settlement level is firmly set at 3% and we see no signs of any movement from this level over the next few months. Average earnings data which includes bonuses, pay progression and other payments outside the annual pay review showed a small increase in June 2005, to 4.2% from 4.1% in May. However, with claimant count unemployment edging up for the sixth consecutive month, there is no evidence to suggest an up-turn in wage pressure in the near future.