Date: 26 January 2017

XpertHR reports pay awards staying low despite rising inflation

Pay deals dipped at the end of 2016, while the first 2017 settlements to take effect suggest a subdued start to the new bargaining year, according to pay analysts XpertHR.
Pay awards across the economy in the three months to the end of December 2016 stood at 1.9%, with half worth between 1% and 2.1%. Most deals gave employees an increase worth the same or less than at their previous review, with just one in six getting a higher increase than last time around.
Since September 2016, XpertHR’s headline measure of pay awards has fallen below the level of retail prices index (RPI) inflation (following almost two years of real-terms growth in wages). The gap between pay awards and RPI continues with this latest release of data. The median pay award now sits 0.6 percentage points below the 2.5% RPI for December 2016.

A year in review

2016 as a whole was subdued in terms of pay awards. Across the private sector, the median award was worth 2%, while the 1% in the public sector was in line with government policy. Around one quarter of all pay awards were at exactly 2%, demonstrating just why our median has struggled to move from this level.
Pay freezes were still evident, while the highest pay increases were often linked to the introduction of the national living wage in April 2016.
XpertHR recorded the highest median pay award in the construction sector, at 2.5%. In contrast, the lowest was among not-for-profit organisations (1%).

The year ahead

Previous research from XpertHR showed that employers in the private sector are forecasting a median 2% pay award in the year to 31 August 2017.
To date XpertHR has collected details of 96 basic pay settlements effective in January 2017. Provisional analysis of these settlements finds that the median award stands at 2%. Half of all awards are worth between 1% and 2%, showing a bunching of pay awards at the lower end. In addition, exactly half of these pay awards delivered a lower increase than employees received in January 2016.
XpertHR pay and benefits editor Sheila Attwood said:
“The first pay awards to settle in 2017 are set at a similar level to that seen over most of the past year. While inflation is beginning to rise, this has yet to feed into pay award levels. But there is no doubt that as the year progresses employers will be feeling the pressure from employees to provide a real-terms pay increase.”

Note to editors

• Press inquiries to Sheila Attwood, sheila.attwood@xperthr.co.uk. Sheila is available for interview.
• In the latest quarterly analysis, details of 60 pay awards effective in the three months to the end of December 2016 that provide an identifiable increase in the lowest adult rate of pay have been recorded. A further 96 pay awards effective in January 2017 have been examined.
All XpertHR press releases can be viewed here. The next press release on pay settlement trends will be released on 23 February 2017.
• XpertHR offers detailed statistics and analysis of pay settlements across the UK. The research is based on the largest sample of pay deals collected in the UK – XpertHR collects details of pay settlements for around 1,600 employee groups each year. Its database contains more than 40,000 pay settlements dating back to 1984.

The median increase by number of pay reviews is the midpoint in the total spread of basic pay awards – i.e. the percentage at which half the pay reviews are at the same or higher value and half are at the same or lower value.

The basic pay award measured is the annualised percentage increase received by the lowest adult grade. It excludes any additional payments over and above the basic rise, such as bonuses, consolidation, increments and performance-related pay.

XpertHR is the UK’s most comprehensive online source of legal compliance, good practice and benchmarking information made available to HR professionals as a single subscription service.

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