Pay settlements stay pegged at 3% despite rising inflation

The median basic pay award continues to run at 3% in the three months to the end of November, despite recent increases in headline inflation, according to pay specialists Industrial Relations Services (IRS).

Our analysis finds that the proportion of pay awards at the higher end of the scale continues to increase, however, with 64% of awards worth 3% or more and almost one third (32%) paying 3.5% or above. At the other end of the spectrum, just 11% of awards are worth less than 2.5%.

Our latest analysis is based on 53 basic pay awards effective in the three months to 30 November 2006, covering more than 300,000 employees.

IRS pay databank ñ other key findings include:

- Upper quartile measure stands at 3.5%. The upper quartile basic pay award ñ the cut-off point for the top 25% of pay deals ñ was 3.5% in the three months to November, the same as our revised finding for the previous rolling quarter, but higher than the 3% at which it has remained for most of the 2006 calendar year.

- Median private sector pay award is 3%. The median pay settlement in the private sector was 3% in the three months to the end of November 2006. However the interquartile range of pay awards in the private sector ñ between which 50% of deals lie ñ stretches from 2.8% to 3.8%. This is higher than the revised interquartile range of between 2.6% and 3.5% recorded for the previous rolling quarter.

- Almost half of pay deals higher than a year ago. A matched sample analysis of 31 pay awards reveals that almost half (48%) were higher than the previous pay award received by the same group of employees. While 29% were worth the same, under one in four (23%) were lower than the previous pay deal.

- Range of manufacturing pay deals shifts upwards. The median pay award in the manufacturing sector stands at 3% for the three months to November 2006, unchanged from the previous rolling quarter. The range of manufacturing pay awards has shifted upwards, however, with 50% of all pay awards worth between 2.8% and 3.9%.

IRS Pay and Benefits editor, Sarah Welfare said: ìMore and more employers are awarding higher pay increases as inflationary pressures build, but this trend is not yet strong enough to move the going rate above 3%. With retail prices index (RPI) inflation at its highest level since May 1998 and running almost one whole percentage point above pay settlement levels, however, the likelihood of higher pay deals being settled in the key pay bargaining months of January through to April appears strong.î