Pay awards stabilise at 2%

Pay awards have stabilised at a ‘welcome’ 2% after a year of uncertainty, according to analysis by XpertHR.

The median basic pay award between May and July 2021 was at this level, unchanged on the figure seen in each of the three previous rolling quarters.

XpertHR said the stabilisation was welcome, particularly as the median pay award fell to nil in the same period a year ago.

Sheila Attwood, XpertHR pay and benefits editor, said: “2020 marked the worst year for pay awards since 2010, so it is welcoming to have seen pay deals rising and now stabilising. It is likely that awards will remain at this level as employers are still regrouping and looking to strike the balance between recruitment and wider reward package costs.”

XpertHR’s analysis was based on 36 pay settlements effective between 1 May and 31 July 2021, which covered more than 687,000 employees.

Employees in the services sector received pay awards of 2% on average – the highest median pay award XpertHR has recorded in this sector since November 2020. Almost two-thirds of pay settlements in the sector were at this level or higher.

In the 12 months to the end of July 2021, the median pay award in the public sector was 2%, with an interquartile range of 1.2% and 3%. In the same period the median in the private sector was 1.5%, with an interquartile range between nil and 2%.

Across the whole economy, the median settlement in the 12 months to the end of July 2021 was 1.5%.

This meant that public sector pay awards ran in line with inflation, whereas private sector awards were lower. According to the Office for National Statistics, the consumer prices index measure of inflation fell from 2.5% in the year to the end of June to 2% at the end of July.

“Despite movements to end restrictions and a move towards a ‘return to normal’, best reflected in the two percentage points increase in private sector median pay awards over the past year, uncertainty still remains,” Attwood said.

XpertHR also found that:

  • Half of pay awards are higher than what the same group of employees received the previous year. In a matched sample of 28 pay deals, both basic and performance based, 54% were higher, while 25% were lower and 21% were the same. Conversely, in the same period in 2020, 61% were lower and only 18% were higher.
  • The middle half of all pay awards was worth between 1.5% and 2.8%. The lower quartile has risen by 0.5 percentage points on the previous three rolling quarters, while the upper quartile is also up by 0.5 percentage points.
  • There were only two pay freezes within the sample. In the same period last year, pay freezes accounted for 51% of the total sample of pay settlements.