UK pay settlements remain stable despite fall in inflation

UK pay deals remain at 3%, according to the monthly research from pay analysts IRS (Industrial Relations Services), part of LexisNexis Butterworths.
The latest analysis of settlements from the IRS pay databank reveals that the headline measure of pay awards ñ the median basic pay increase ñ has held steady at 3% for the three months to November 2005. Pay deals have also maintained a 3% median throughout 2005 to date.

The analysis covers the three-month period between 1 September 2005 and 30 November 2005. IRS researchers collected information on 46 settlements, 37 of which cover 166,912 employees and allow for an identifiable basic pay increase.

IRS pay databank - other key findings include:

No movement in range of pay deals. The interquartile range (where half of all pay deals fall) is unchanged in the quarter to November 2005, now that the IRS October findings have been revised downwards since their last analysis. The lower quartile, below which the bottom 25% of pay deals are found, remains at 2.5%. The upper quartile holds at 3.5%, so half of all pay deals now span one percentage point.
Private and public sectors show stability. The median basic pay increase for private and public sector settlements stands at 3% for the 12 months to November 2005, unchanged from the year to October.

Manufacturing and services pay deals hold steady. Pay growth in the manufacturing and services sectors remains even, for the quarter to November 2005. Pay deals in both sectors are pitched at a median 3%, identical to the median increase for the quarter to October.

Half of pay deals lower compared with previous year. A matched sample analysis of 23 basic pay deals, where both the current and previous settlement for the same bargaining groups have been monitored, reveals that just over half (52%) allowed for a lower increase than the pay award for the same employee groups a year ago. Just over one-third (35%) received a higher increase than the previous year, while three bargaining groups received the same basic pay awards in both 2004 and 2005.

Merit budgets in line with basic pay deals. IRS carried out a separate analysis of the nine pay reviews - covering 64,518 employees - among the sample that base pay rises solely on individual performance. This reveals that the median paybill budget increase remains at 3% in the three months to November 2005, unchanged from the 3% found for the previous quarter. This is the second consecutive quarter that the median merit budget increase is in line with the median basic pay award.

IRS Pay and Benefits editor, Sheila Attwood said:

ìIt will be interesting to see how pay deals pan out in 2006. The Chancellor has called for wage restraint, by asking the public sector pay review bodies to bear in mind the 2% CPI inflation target when making recommendations for 2006. Private sector employers still favour the all-items RPI when setting pay awards but this measure has got smaller over the past few months.

ìLooking ahead, the first pay deals to settle in the new year are likely to be long-term deals determined by an inflation-linked formula. However, several engineering companies that have set their January 2006 pay awards based on inflation rates over the autumn have seen guaranteed increases coming into play because of low levels of headline inflation.î