The latest data* shows that pay awards have nudged upwards in the three months to the end of May 2021, with the median reaching its highest level for six months. Between March and May 2021, the median pay award was 2%, 0.1 percentage points higher than the figure recorded last month and back to the levels last seen at the end of November 2020.
Accounting for just under one in five (17.8%) of all the pay settlements recorded, pay freezes are still very much evident. Notably, there is a higher proportion of pay freezes in the services sector, at 20.6% of the total sample from the sector, than in manufacturing and production (where the figure is 10.7%).
Although we have seen a pick-up in pay settlement levels over the past two rolling quarters, the value of pay awards is falling behind the cost of living. ln May 2021, retail prices index (RPl) inflation rose to 3.3%, while consumer prices index (CPl) inflation increased to 2.1% (above the Bank of England’s 2% target). The headline pay award has now been worth less than inflation on the RPI measure for six rolling quarters, with the current gap of 1.3 percentage points the largest since pay awards fell to nil in the three months to the end of July 2020. Pay awards have also fallen behind CPI for the first time since the three months to the end of July 2020.
Latest pay award findings:
Based on a sample of 228 pay settlements effective between 1 March and 31 May 2021, and covering the outcome for more than 940,000 employees, found the following*:
- Upper quartile nudges higher. The lower quartile (at or below which the bottom quarter of deals lies) stands at 1%, unchanged on the figure for the previous three-month period, which has been revised up from 0.8%. The upper quartile has moved up from 2.2% to 2.3%, meaning that the middle half of pay settlements are worth between 1% and 2.3%.
- Most common increase is 2%. Besides a pay freeze, the most common pay award is 2% – awards at this level account for one in six (16.2%) basic pay settlements.
- More than half of pay awards are lower. Of a matched sample of 188 pay deals (both basic and performance based), 55.3% are lower than the same group received the previous year, and a quarter (25%) are set at the same value. Just one in five (19.7%) has received a higher award.
On the annual measure, pay awards in the public sector (at a median 2.5%) are now more than double the value of the private sector, where a 1.2% median pay award was recorded in the year to the end of May 2021. This figure is still well below the figure of 2.2% recorded for the year to end in May 2020.
Sheila Attwood, XpertHR pay and benefits editor, said: “Whilst pay awards have edged up over the past few months, it feels as though a 2% median award might be the ceiling for now. While some employers are addressing labour shortages through higher starting salaries, when it comes to annual pay reviews many organisations remain unable to offer much or any increase.”