Pay once again rising by three per cent

Pay increases are back running at a median 3% in the three months to the end of March 2006, according to the latest data collected by pay specialists, Industrial Relations Services. The median (see notes to editors) basic pay award for January and February 2006 (initially at 2.9% and 2.8% respectively) have also been revised upwards to 3.0% as more pay deals for those months have come in.

During the first quarter of 2006, IRS researchers have collected information on 205 pay settlements, covering 377,154 employees, with148 settlements allowing for a basic pay increase. This latter group forms the basis of the analysis.

IRS pay databank ñ other key findings include:

- Range of pay deals holds steady. The interquartile range ñ where half of all pay deals fall ñ is unchanged from the revised findings for the quarter to February 2006. The lower quartile, below which the bottom 25% of pay deals are found, is pitched at 2.5% in the quarter to March 2006. Meanwhile, the upper quartile, which houses the top quarter of pay awards, holds quite close to the median increase at 3.1%.

- Public and private sector deals run parallel. In the year to March 2006, the median pay increase in both the private and the public sector is pitched at 3%, unchanged from the revised findings for the year months to February.

- Manufacturing awards follow the trend. Pay deals in the manufacturing sector are now also worth a median 3% to the employees covered in the three months to March 2006, unchanged from the quarter to February. Service sector deals have fallen to a median 2.7%, although this should be treated with caution as is based on a small sample.

- Pay deals lower than previous year. An analysis of a matched sample of 113 pay settlements, for which information has been collected in both 2005 and 2006, reveals that six in 10 (61%) settlements in the quarter to March 2006 were worth a less than their previous pay deal. Three in 10 (29%) pay settlements concluded in the quarter to March 2006 awarded a higher increase than in 2005, while 10% of pay deals allowed for the same increase in both years.

- Merit budgets higher than basic pay increases. A separate analysis of the 57 performance-related pay settlements monitored by IRS in the quarter to March 2006 reveals that the median merit budget is pitched at 3.5%. This is 0.5 percentage points higher than the median basic pay award for the same period, but identical to the median paybill budget found for the quarter to February 2006.

IRS Pay and Benefits editor, Sheila Attwood said:

ìDespite headline inflation ñ the key benchmark for pay setters ñ remaining stable over the first three months of the year, pay settlements have once again return to stand at 3.0%.

Initial analysis of 30 basic pay awards taking effect in April 2006 reveals that the median pay increase has fallen to 2.5%. However, this figure should be seen as indicative rather than a concrete conclusion of how the April pay round will continue, as it is likely to be revised upwards as more deals are added to the IRS Pay Databank. Several large public sector deals that take effect in April, including those for local authority workers, nursing and other health professionals, and the prison service, are all worth less than 3% this year following pressure from the chancellor for pay restraint in the public sector. As more pay negotiations are concluded, we will see whether private sector employers follow suit.î