Total pay falls by 0.4% in real terms

Pound coins

Total pay for employees in Great Britain, including bonuses, fell by 0.4% in real terms between July to September 2016 and July to September 2017, according to research by the Office for National Statistics (ONS).

Its UK labour market: November 2017 report also found that regular pay, excluding bonus payments, fell by 0.5% in real terms, which has been adjusted for consumer price inflation, between July to September 2016 and July to September 2017.

In nominal terms, which has not been adjusted for consumer price inflation, both regular pay and total pay increased by 2.2% between July to September 2016 and July to September 2017.

Average total pay, including bonuses, was £509 a week in nominal terms before tax and other deductions from pay for employees in Great Britain in September 2017. This compares to £496 a week in September 2016. Average regular pay, excluding bonuses, was £477 a week for British employees in September 2017 before tax and other deductions from pay. This compares to £467 a week in September 2016.

In real terms, average total pay for employees in Great Britain was £490 a week in September 2017, before tax and other deductions from pay. Average regular pay in real terms, excluding bonus payments, was £458 a week in September 2017, before tax and other deductions from pay.

Average total pay for employees in Great Britain, in nominal terms, increased by 35.3% between January 2005 and September 2017, rising from £376 a week to £509 a week. Over the same time period, the Consumer Prices Index, including owner occupiers’ housing costs (CPIH), increased by 33.2%.

Gerwyn Davies, senior labour market analyst at the Chartered Institute of Personnel and Development (CIPD), said: “This is the weakest set of labour market data for some time, with the largest fall in the number of people in work for two years. We will need to wait and see if this is merely a blip or if this is the first sign of a turning of the tide for the UK labour market. This will however be more likely to cause operational problems, such as lack of staff for key roles, rather than force wages up or result in higher productivity through employers trying to get more out of existing staff. The prospect of wages rising sharply seems remote, and this will leave people feeling the pinch over the Christmas period, and potentially well into the new year. If the UK labour market is becoming more constrained, the contribution from migrant labour will become even more important.”

Mariano Mamertino, Europe, Middle East and Africa (EMEA) economist at Indeed, added: “The problem is easy to identify but very hard to remedy; it’s offering [employees] an abundance of jobs but falling real wages. The hospitality and transport sectors are prime examples, and the ONS data reveals they created high numbers of jobs but weak wage growth. With consumer prices rising at an ever faster rate and wage levels refusing to budge, each passing month sees a few more Pounds shaved of people’s disposable incomes.

“Nevertheless, with employers reporting recruitment difficulties in many parts of the country, it has become easier for jobseekers to find work than it is to secure significant pay rises, meaning for many the focus is shifting to considering what good work looks like.”

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Doug Monro, co-founder at Adzuna, said: “Just in time for Christmas, jobseekers and employees are beginning to see UK wages pick up speed. Average weekly earnings for employees increasing by 2.2% shows the tide is turning on salaries. In keeping with a low unemployment and steady inflation rate, there is festive cheer being spread  among the labour market as pay rises have become a priority to boost productivity and staff morale. Christmas has come early for train drivers in particular, following reports they have agreed a 28% pay rise to end Southern Rail strikes.

“We hope to see this ripple effect spread throughout the labour market as strong demand for fairer pay packages mounts, following Living Wage Week recently. With rising food prices still lagging behind salaries, household incomes will continue to be squeezed at present, but we hope to see the gap shrink in the coming year.”