Zoe Woolacott | 26 May 2021

Median back to 2.0% as proportion of pay freezes continues to fall

The median pay award across the economy has risen to 2.0% for the three months to April 2021, having dipped in March. April remains the most popular month for pay setting and many firms in both higher-paying sectors such as finance and lower-paying sectors, such as retail and care services and housing, implement annual increases at this time of year. The uplift in the National Living Wage, which rose by 19p, or 2.2%, to £8.91 on 1 April 2021, is a key influence on pay reviews in the lower-paying areas.

The proportion of pay freezes has fallen across the economy – from around a quarter of all outcomes to 17% of our latest sample, which is based on 125 awards effective between 1 February and 30 April 2021. The distribution of increases for awards above 2% has remained fairly stable. However, the proportion of lower-level increases, between 0.1% and 1.99%, has continued to rise and this range now accounts for 29% of all outcomes.

Lower awards in 2021 than in 2020

Nearly three-fifths of pay awards effective between 1 January and 31 December 2021 are at a lower level than under the same review last year, according to our monitoring of pay awards for 98 separate employee groups. We analysed a sample of pay outcomes from 2020 and compared them with the 2021 awards for the same groups. The results also showed that around a quarter of outcomes resulted in a higher award this year and the remaining 18% of outcomes resulted in the same level of increase being applied in both 2020 and 2021.

Our sample contained 27 pay freezes in 2020 but some 59% of these reviews resulted in a pay rise in 2021, most commonly in manufacturing. The remainder saw another freeze as employers in transport and some areas of engineering continue to face challenges to labour costs due to pandemic restrictions and reduced demand in their industries.

Full analysis will appear in our forthcoming issue of Pay Climate, due 3 June.

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Pay Climate is an information service providing you with up-to-date analysis of pay awards and other reward measures across the economy. This regular bulletin keeps you and your team at the forefront of pay expertise and trends.