IDS research: Median pay award remains steady at 2.5%

The median pay award in the UK remained steady at 2.5% in the three months to March 2011, according to the latest IDS Pay Report by

Some 61% of all pay deals were recorded in a range between 2% and 3% inclusive, while 83% of settlements were at 2% or higher over the reference period.

Pay awards continue to be recorded at higher levels in the private services sector than in the rest of the economy, at 2.9% for the three months to March compared to 2.5% for the manufacturing and production sectors.

April settlements in the private sector are not included in the latest analysis, but a look ahead indicates higher levels of increases than those recorded in the first quarter of 2011. The median settlement in the private sector for April is provisionally 3%.

Both the figures for the matched sample and those for April reviews reflect the impact of higher inflation on private sector pay setting since the start of the year. April is also a key month for pay setting in the public sector, and here the picture is one of widespread pay freezes as a result of the government’s pay policy.

The settlement level of 2.5% continues to lag behind inflation which is currently 5.3% on the retail prices index (RPI) measure typically used to benchmark annual pay reviews. Alongside high inflation, the recovering profitability of firms also provides an upward pressure on pay settlement levels.

Ken Mulkearn, editor of IDS Pay Report, said: “Our pay settlement figures show overall stability, with some evidence of modest upward pressures coming through from the initial data on April awards.

“The various pressures on pay are finely balanced, with higher inflation being offset to some extent by employers’ concerns about the economic recovery and the impact of public sector job cuts on the labour market. It may also be that organisations’ retention of profits is acting as a brake on pay growth.

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“This could be of concern to policy-makers, at least in so far as consumer spending, which appeared to weaken recently, relies on higher wages. Next month’s data, for the three months to April, will be important in this respect.”

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