Pay awards hold at 3%, but early January deals are higher

The IRS headline measure of pay awards ñ the median in the range of basic awards ñ continues to stand at 3% in the three months to the end of December, according to pay specialists Industrial Relations Services (IRS).

An initial snapshot of 22 pay awards settled in January 2007, however, reveals that the median has increased to 3.6% for pay awards concluded so far this month. While this figure is likely to be revised downwards as more deals are concluded, it suggests that higher retail prices index (RPI) inflation ñ the measure favoured by wage setters ñ is feeding through to higher January pay awards.

Our latest full analysis is based on pay awards effective during the three months to the end of December 2006. IRS researchers have collected details of 58 pay awards, of which 52 include an identifiable increase in basic pay.

IRS pay databank ñ other key findings include:

Lower quartile shifts upwards. The lower quartile pay award ñ at or below which the bottom 25% of pay deals stand ñ has shifted upwards to 2.8% in the three months to 31 December 2006 from 2.5% the previous rolling quarter, the level at which it has stood for every rolling quarter since the three months to January 2006. With the upper quartile ñ marking the top quarter of pay awards ñ unchanged at 3.5% in the three months to December 2006, this means that the interquartile range has narrowed, with 50% of all pay awards worth between 2.8% and 3.5%.

Matched sample of awards reveals upward pressure. An analysis of the pay awards for which the details of the previous award for the same employee group are known reveals that 53% of pay deals are higher than the previous year, an increase on the 48% recorded for the previous rolling quarter.

Manufacturing and services pay awards aligned. The median pay award in both the manufacturing and services sectors has held steady at 3% in the three months to 31 December 2006. The upper quartile award in the manufacturing settlement, however, stands at 4% compared with the upper quartile of 3.4% in the services sector.

Public and private sector pay awards level. The median pay settlement in both the public and private sectors is 3% in the 12 months to December 2006, which has been the case throughout 2006.

IRS Pay and Benefits editor, Sarah Welfare said:

ìThe first few January pay deals are noticeably higher than the 3% level around which they have held for over three-and-a-half years.

It is still too early to jump to firm conclusions, particularly as the first pay awards to come in are more likely to be linked to higher RPI inflation. However all the indications are that pay settlements are likely to shift upwards from their long-standing median of 3% during the early part of 2007.î