Without wishing to leap ahead too much, the January pay round is almost upon us. And January pay reviews, many of which are in manufacturing, could set the tone for the rest of 2019. Thanks to a number of long-term deals that are due to pay out in January, we already have a sense of the level of increases that might be involved. Examples of weathervane deals include that at construction equipment manufacturer JCB, which is set to pay rises equal to the November RPI from January. These could be over 3%, if the inflation forecasts we report on page 5 are correct. Flight attendants at easyJet are due to receive 2.7%, with cabin managers getting 3.3%. And electricians will receive increases of 2.74% in the third year of a four-year industry-wide deal involving pay rises that increase over the course of the agreement. The first year saw 2%, the second 2.5%, and the final year, in 2020, will provide increases of 3%.

These increases are in line with the higher-end deals we’ve already begun to see in parts of the private sector (see page 2). Once the January pay round is over, thoughts will turn to April, the key review period for much of the service sector. But before then, there’s the rather important matter of Britain’s departure from the EU on 29 March – assuming it happens. Across many sectors UK companies that trade with Europe may need to change business processes in order to maintain existing market access. Many might have to comply with different UK processes in the wake of Brexit, and some will have to establish an EU presence. Many of these changes imply upskilling existing staff, and this could have an impact on pay and progression.

In addition, new – and possibly more challenging – post-Brexit trading conditions will require employees to be engaged and motivated. While pay is not necessarily the most important factor when it comes to engagement, it remains a key foundation. Obviously, this has to be balanced with affordability, and if trade is adversely affected by Brexit, affordability could take a hit. But the point about linkages between engagement and pay still stands. And what’s true of pay is also true of the wider benefits package.

Thawing

This bulletin also examines how pay pressures have been rising in the public sector (page 6). Brexit is clearly a major issue for the machinery of government at a variety of levels. And as it prepares for this, the government has been making strenuous efforts to recruit staff from the private sector, particularly those with experience of the areas that will be crucial as the UK forges a new relationship with the EU and sets its sights further afield, but also commercial and IT staff. This has contributed to upward pressure on public sector pay, at a time when pay restraint has only just begun to be relaxed and employees’ expectations in this regard are rising.

Hiring staff who are used to higher levels of pay in the private sector is forcing government employers to pay above the usual levels for the public sector, and this is prompting other staff to sit up and take notice. But there’s a concomitant pressure on private employers if they want to hold onto these people – and, as a result, the thawing of the public sector pay freeze could have an effect on private sector pay movements as well.