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U.K. Pay Increases Shrink to 1%

Aug. 31, 2009 — Between May and July 2009, the median basic pay increase was just 1% in the United Kingdom, according to a recent analysis.

The Industrial Relations Services (IRS) analysis found that the median basic pay increased has been just 1% for each rolling quarter since the three months to April 2009. Prior to 2009, the previous record for low pay awards was a 2% median recorded between August and December 1993.

Key findings:

• Private sector deals slump. The median pay award in the private sector was 1% in the three months to July 31, 2009, but figures for the three months to the end of May and June show this median revised to 0% and 0.5% respectively. They show the extent to which pay freezes have dominated the pay review pattern in the private sector over the past few months.
• Four in ten pay awards are pay freezes. A total of 19 pay awards — or 41.3% of the total sample of pay deals (both basic and merit-based) — were pay freezes in the three months to the end of July 2009. There were no pay cuts recorded this rolling quarter, however.
• Manufacturing deals remain flat. The median pay award was a pay freeze in the three months to July 2009, which has now been the case for four successive rolling quarters.
• Public sector pay awards deteriorate. Over the year to July 2009, public sector pay settlements were running at 2.3%, down from 2.5% in the year to June.

"Pay [increases] have taken a far greater hit in the current recession than they did in the recessions of the 1980s and 1990s, our data suggests,” said Sarah Welfare, XpertHR pay and benefits editor. “All the evidence suggests that pay awards will remain subdued for the rest of 2009. With rising unemployment, a low minimum wage rise due in October and headline inflation in negative territory, the chances of higher pay rises for employees in the near future will be slim."

About the Analysis
In the three months to July 31, 2009, IRS collected details of 46 pay awards, covering 228,557 employees. The headline figures are based on analysis of 41 basic or across-the-board pay awards, excluding pay deals based on individual performance.

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