Pay settlements still stable - but pressures are mounting

The latest analysis of UK pay deals reveals that the prolonged period of pay stability continued to the end of 2004, according to the monthly analysis from pay analysts IRS (Industrial Relations Services), part of LexisNexis Butterworths.

The median ñ midpoint in the range ñ basic pay deal is 3% for the three months to the end of December 2004, unchanged from the previous 21 rolling quarters. (See notes to editor.)

Alongside this figure, however, there is evidence that some early 2005 pay settlements are bucking the trend of the past 22 months. The first settlements to be concluded in the New Year reveal that the 3% benchmark has been breached. To date, IRS researchers have already analysed 24 January pay deals, which range from 2.25% to 5%, with a median settlement of 3.4% ñ well above the 3% figure recorded by IRS for every rolling quarter since March 2003.

Further evidence of upward pay pressure can be found in the volume of pay deals worth 3% or less. In the three months to November 2004, the proportion of these awards stood at 66%. For the quarter to December, it has dipped to 62.5%; for January deals concluded so far it is down to 25%. The number of settlements awarding rises of exactly 3% has also gradually fallen, from 29% of recorded deals with effective dates in the three months to November, to 25% in the three months to December, and to 17% for deals effective in January.

Other key IRS pay databank findings:
Interquartile range stable. Pay deals remain fairly widely spread, with half of all deals falling between 2.5% and 3.5%. The lower quartile remains at 2.5% for the third consecutive month, while the upper is unchanged for the second month at 3.5%.

Public and private sector deals matched. No change is noted in the value of private and public sector pay deals, which are both running with a median 3% deal.

Matched deals show upwards pressure. IRS analysis of a matched sample of pay deals reveals that just over half (53%) are higher than the previous settlement, while one-third (34%) are lower and the remaining 13% paid the same in both years.

Weighted median jumps. The weighted median ñ which takes account of the number of employees covered by individual pay deals ñ has jumped in response to several above inflation industry-wide agreements.

IRS Pay and Benefits editor, Sheila Attwood said:
ìAlthough these figures should be treated with some caution because of the low sample size, IRS analysis of January 2005 pay deals gives an early indication of future pay trends and provides some evidence that pay settlements are likely to move above 3% at the start of this year.

ìWe expect negotiators to be under pressure to increase the level of pay settlements concluded in the New Year. In particular, any inflation-based deals linked to RPI levels late in 2004 or early in 2005 are likely to be pushed above the 3% mark. Although as more January deals are concluded the median for that month alone will drop from its current level of 3.4% , there is a real chance that our rolling quarterly median with move upwards before long and our longest period of pay stability will be over.î