Whole economy pay awards have been worth 2% for the past two years, according to data from pay analysts XpertHR. The latest readings, for three the months to the end of March 2016, show the median basic pay award at 2% for the 24th successive rolling quarter.
But a preliminary examination of the first pay awards concluded for April 2016 reveals a bleaker outlook. April is the single most important month of the year for pay settlements, with around four in 10 taking effect in this month alone.
Based on a sample of 91 basic pay awards effective in April 2016, the median pay settlement for this month is worth just 1.5%. The lower April deals have also pulled down the figure for the three months to the end of April, with provisional data showing that the rolling quarterly median basic pay award has fallen to 1.7%.
These whole-economy figures contain pay awards across both the public and private sectors. XpertHR’s sample of data for the first three months of the year does not contain any public sector awards, as the first of these tend to take effect in April. Yet excluding these deals and examining the private sector in isolation does little to change the direction of the April figures – the median private sector basic pay award in April 2016 currently stands at 1.7%. Public sector pay awards so far in 2016 continue to be centred on the 1% figure set out in Government policy.
The data also shows that around half of all pay awards are worth less than the same group of employees received last year. In a matched sample of April 2016 pay awards, almost half (45.7%) were less than the same employees were paid last year, while just 22.9% were higher. Similar numbers were recorded for the first three months of the year (51.8% lower; 17% higher).
There is little in the data to suggest what might be causing the fall in the level of pay awards. For example, a couple of the lower pay awards are the result of a link to RPI inflation at the end of 2015, when it stood at just over 1%. In contrast, a couple of the higher pay awards for April 2016 are linked to the introduction of the national living wage, which at £7.20 an hour from 1 April represented a 7.5% increase on the national minimum wage rate. There is some evidence that employers are reducing the pay awards for other staff to accommodate the increases for those eligible for the national living wage. For example, a charity in our sample made a 2.8% increase to around one-third of its staff in order to comply with the national living wage, with a 2% award for the remaining employees. A care provider froze pay for all employees except those entitled to the national living wage.
XpertHR pay and benefits editor Sheila Attwood said:
“The first look at pay settlements for April 2016 reveals the extent to which employers are struggling with making higher pay awards. The data provides early evidence that pay settlements might be heading downwards from what is already a relatively subdued figure of 2%. While many employees will have benefitted from the 1 April introduction of the national living wage, it is possible that many others will struggle to secure even a 2% pay increase this year.
Note to editors
- Press inquiries to Sheila Attwood, email@example.com, tel 0208 652 2251. Sheila is available for interview.
- In the latest quarterly analysis, details of 264 pay awards effective in the three months to the end of March 2016 that provide an identifiable increase in the lowest adult rate of pay have been recorded. For April 2016, 91 pay awards have been recorded.
- All XpertHR press releases can be viewed here. The next press release on pay settlement trends will be released on 26 May 2016.
- 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.