IDR | 21 Mar 2018

Pay awards show upward turn

The median pay award across the whole economy rose to 2.5% in the three months to January 2018, according to the latest monitoring figures from IDR. This is the highest level since the quarter to December 2015, when many firms pushed up pay rates in advance of the introduction of the Government’s National Living Wage (NLW) the following April. In the two years since then, the median pay award has only risen above 2% on three occasions. The uptick in settlement levels comes on the back of higher inflation than previously, with the RPI at 4% and the CPI at 3%. As a result, higher pay rises recorded in the private sector in late 2017 have been sustained into the New Year. 

The latest figures are based on 50 settlements, covering almost 330,000 employees in total. Most of the awards are effective from January, and most are in the private sector, with a small proportion at not-for-profit organisations. (Most public sector pay reviews take place in April, so the latest sample does not contain any pay awards in the non-traded sector and the findings for the private sector largely mirror the whole-economy figures.) For the first time in a year, the median settlement in private services has edged ahead of that in manufacturing. In the three months to the end of January the median settlement in private services rose to 2.6%, up from 1.8% in the quarter to October 2017, and the highest for this sector since October 2016. Settlements here ranged widely, from 1.3% to 5.2%, with 2.5% the most common increase.

In manufacturing, pay awards were worth 2.5% at the median in the period to the end of January 2018, in line with the whole-economy figure, but down 0.2 percentage points from last October. Settlements in manufacturing range from 2% at the lower end to 4.5% at one engineering firm. Ken Mulkearn, Editor of IDR Pay Climate, whose staff collect and analyse the data on pay settlements, said: ‘Our latest figures suggest that the pay growth we saw in the private sector in the three months to October 2017 has continued into 2018. This is closely linked to the rise in inflation since then, and the future path of the cost of living will be a crucial determinant of pay growth. Settlements can rise around this time of year only to fall back to previous levels with April pay reviews. But this year could be different, with pressures from recruitment and retention as well as inflation, and a forthcoming 4.4% rise in the National Living Wage from April. In addition, the Government is widely expected to relax its policy of pay restraint in the public sector.'

Notes for Editors: IDR Pay Climate, published quarterly, with additional monthly updates, is a leading source of research and analysis on pay and benefits across the economy. For questions about this research contact Ken Mulkearn, or to subscribe email sales@incomesdataresearch.co.uk