Pay awards sink to 1%

Pay awards for employees are running at just 1%, according to provisional analysis from Industrial Relations Services (IRS), part of the XpertHR subscription service.

The latest figures for the quiet bargaining period over the three months to 31 July 2009 show that the median basic pay award was 1% (see chart). Significantly, our figures for the April pay round have also been revised downwards as more pay awards have been settled. They show that the median basic pay award has been 1% for each rolling quarter since the three months to April 2009.

Prior to 2009, the previous record for low pay awards was a 2% median recorded between August and December 1993.

Key details

In the three months to 31 July 2009, IRS collected details of 46 pay awards, covering 228,557 employees. Our headline figures are based on analysis of 41 basic or across-the-board pay awards, excluding pay deals based on individual performance.

Private sector deals slump. The median pay award in the private sector was 1% in the three months to 31 July 2009, but figures for the three months to the end of May and June show this median revised to nil and 0.5% respectively. They show the extent to which pay freezes have dominated the pay review pattern in the private sector over the past few months.

Four in ten pay awards are pay freezes. A total of 19 pay awards - or 41.3% of our total sample of pay deals (both basic and merit-based) - were pay freezes in the three months to the end of July 2009. There were no pay cuts recorded this rolling quarter, however.

Manufacturing deals remain flat. The median pay award was a pay freeze in the three months to July 2009, which has now been the case for four successive rolling quarters.

Public sector pay awards deteriorate. Over the year to July 2009, public sector pay settlements were running at 2.3%, down from 2.5% in the year to June.

XpertHR Pay and Benefits Editor, Sarah Welfare said:

Pay awards have taken a far greater hit in the current recession than they did in the recessions of the 1980s and 1990s, our data suggests.

All the evidence suggests that pay awards will remain subdued for the rest of 2009. With rising unemployment, a low minimum wage rise due in October and headline inflation in negative territory, the chances of higher pay rises for employees in the near future will be slim.