No slowdown in pay awards over summer

Pay settlements are unchanged at 3.5% as the 2006/07 pay bargaining year draws to a close, the latest data from pay specialists Industrial Relations Services (IRS) reveals.

The median whole-economy basic pay award was 3.5% in the three months to 31 August 2007. The split between public and private sector pay deals continues, with public sector pay awards at 2.8% compared with 3.5% in the private sector in the 12 months to the end of August.

IRS researchers have collected details of 94 pay awards that were settled in the three months to August 2007. Of these, 68 pay deals include an identifiable increase in basic pay.

IRS pay databank - other key findings include:

Public sector deals lag behind private sector. Public sector pay awards were worth a median 2.8% in the year to the end of August 2007, up from a revised 2.6% in the year to July, but well below the 3.5% median pay award recorded for the private sector in the year to August.

Weighted median strong. The median weighted by the number of employees covered by each pay deal is 4% in the three months to August 2007. High-paying settlements include a number of industry-wide construction deals and the 4% pay rise awarded to 20,000 BBC employees from 1 August 2007.

Range of pay deals widens. The lower quartile of basic pay awards (marking the bottom 25% of pay deals) remains unchanged for the eighth successive rolling quarter, but the upper quartile (above which the top 25% of pay awards lie) has crept up by 0.1 percentage point to 4.1% in the three months to the end of August.

Service sector outpaces manufacturing. Basic pay deals in the services sector were worth a median 3.5% in the quarter to August 2007, compared with 3.2% in manufacturing.

Three in four pay deals higher than previous year. Analysis of a matched sample of pay awards reveals that almost three-quarters (73%) of pay awards are higher than the award for the same employee group last year, unchanged from the previous rolling quarter. Just one in 10 (10%) are lower and 17% pay the same increase.

Late surge in merit deals. The median performance-based pay award was 3.75% in the three months to August 2007, higher than the 3.5% level at which merit deals have stuck throughout 2007 so far. A number of these are in the finance sector, such as the 4.88% merit pot allocated for pay rises for 16,500 non-management staff at Nationwide from 1 July 2007.

IRS Pay and Benefits editor, Sarah Welfare said:

Over the quieter summer months, private sector employers have continued to award relatively high pay rises, with public sector pay deals failing to keep pace.

Looking ahead to the next key bargaining round in January 2008, much will depend on the level of headline inflation during the last few months of this year, as well as company profitability and willingness to pay.