Pay deals improve as inflation rises

Pay deals improve as inflation rises

Pay deals in April have given cause for optimism but they come against a backdrop of rising inflation.

According to research from XpertHR, although the median pay award is still less than it was a year ago, it has reached its highest level since the quarter ending in November 2020.

The median basic pay award for the three months to the end of April was 1.9%, up from 1% recorded in the four previous rolling quarters.

XpertHR attributed the uplift to a raft of new pay deals agreed in April pushing the median figure up. Almost half of all pay deals are settled during April, making it the most common month for wage increases.

Pay freezes are still in place for almost one in five employers recording pay settlements this quarter, however.

Furthermore, 57% of all pay awards over this period were lower than what the same group of employees received a year ago. A quarter (24.8%) were the same, and 18% were higher.

XpertHR’s analysis comes after the Office for National Statistics (ONS) announced yesterday that the UK’s consumer prices index (CPI) inflation rate increased to 1.5% in April thanks to a rise in energy and clothing costs.

CPIH, the consumer prices index which includes housing costs, rose to 1.6% in the 12 months to April 2021, up from 1.0% in March.

Meanwhile, the retails prices index (RPI) almost doubled. While not described by ONS as a “national statistic”, RPI is often referred to in pay negotiations. It jumped from 1.5% in the year to March 2021 to 2.9% for April.

Looking at pay settlements annually, XpertHR found that public sector pay edged ahead of the private sector, with the median award for the year to April 2021 at 2.5%, compared with a whole economy median of 1.2%.

Over the same period, pay deals in the private sector were worth 1% at the median, with the middle half of awards worth between nil and 2%. The whole economy median over the year to the end of April 2021 is 1.2%.

XpertHR pay and benefits editor Sheila Attwood said: “There is a noticeable upturn in the data for April this year, and the first clear sign for a year that pay settlement levels are on the up.

“However, many organisations are continuing to exercise caution when it comes to the value of increases they are passing onto employees and pay freezes are still being put in place.”