The past year has been something of a rollercoaster for pay awards. Having stood just shy of 2.5% near the start of the year, our headline measure - the rolling three-month median - fell to a pay freeze in the middle of the year, before gradually picking up to 2% in the final quarter (see chart). The private sector followed a similar trajectory as this whole-economy pattern, but the public sector has seen pay awards maintained at a 2.5% median throughout the year. Within the private sector, pay awards held up slightly better in the services arm than for manufacturers.
Pay review pattern - whole economy, December 2019 to December 2020
Source: XpertHR.
The 2020 whole-year data provides a good indication of the extent to which pay awards have fallen over the past year (see table). Both across the economy as a whole and the private sector, pay awards in the 12 months to the end of December 2020 were worth a median 2%, compared with 2.5% a year earlier.
In 2020, a fifth (19.3%) of all pay awards resulted in a pay freeze, compared with around one in 20 (5.3%) in 2019. Almost all the pay freezes recorded in 2020 affected the private sector.
Pay awards 2019-2020 |
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12 months to end December 20201 |
12 months to end December 20191 |
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Whole economy |
2.0 |
2.5 |
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Private sector |
2.0 |
2.5 |
|
Public sector |
2.5 |
2.5 |
|
Manufacturing and production |
2.0 |
2.5 |
|
Private-sector services |
2.0 |
2.5 |
|
1 Median basic pay award. Source: XpertHR. |
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Latest pay award findings
Based on a sample of 31 basic pay awards effective between 1 October and 31 December 2020, we find that:
- Headline pay award unchanged. The median basic pay award over the three months to the end of December is 2%, unchanged on the previous two rolling quarters.
- Interquartile range narrows. A decrease in the number of higher-end pay awards means that the middle half of all basic pay reviews now fall within the narrower range of 2.2 percentage points, between nil and 2.2%.
- Lower pay awards dominate sample. Based on a matched sample analysis, more than six in 10 (62.5%) of the latest pay deals are worth less than the same group of employees received in 2019.
- Pay freezes continue to feature. Albeit based on a small sample in this quarter, more than one-third (35.3%) of all pay reviews resulted in a nil increase for employees.
First 2021 pay awards show no increase
At the time of writing, the first organisations were reporting on their January 2021 pay reviews. Our sample, standing at 67 basic pay awards effective in January this year, represents a fraction of the total sample that will be collected in due course, but nonetheless gives us an early indication of how employers are pitching their 2021 pay reviews.
Among this limited sample, the median pay award so far for January 2021 is 1%, just half the level of the overall median for 2020 pay awards. Pay awards are evenly spread around the median, with the cut-off point for the lowest 25% of deals by value standing at 0% and the upper quartile at 2%. Pay freezes continue to feature heavily, accounting for four pay settlements in 10 (40.3%), although we have seen in previous years that organisations making a pay freeze often agree this quicker than those looking at a pay rise, so we can reasonably expect the proportion of pay freezes to fall as more data is collected.
XpertHR pay and benefits editor Sheila Attwood said:
“In terms of pay awards, 2020 was characterised by high levels of uncertainty translating into lower pay increases and in many cases, pay freezes. The early signs from 2021 suggest that the situation will deteriorate further, with pay freezes more common and pay awards well below the rate of inflation.”