The median basic pay award is 2.5% in the three months ending 30 September 2018.
More than half of all pay awards are higher than the same employee group received a year earlier.
Pay settlements in the manufacturing-and-production sector are worth more than those in the services sector.
In the year to date, pay awards in the public sector continue to lag behind the rest of the economy.
In the three months to the end of September 2018, the median basic pay award has held up at 2.5%, the same level as the previous rolling quarter and a level it has maintained for much of 2018. The interquartile range has also remained consistent in each rolling quarter of this year, with the middle half of pay awards worth between 2% and 3%
An upturn in the median basic pay award to 2.5% in January this year was recorded, 0.5 percentage points higher than the 2% level that had prevailed for a number of years. The only deviation from this was in the three months to the end of July when the median slipped to 2.2% (revised down from the 2.3% reported at the time). However, in the three months to the end of September 2018, with more than half of all settlements higher than the previous year, employers continue to reward their staff with more generous pay increases. The most common basic pay award is 2%, with one in five settlements (20.2%) at this level.
For the three month period between 1 July and 30 September 2018, XpertHR has collected details of 126 pay awards in organisations across the economy, covering more than 1.2 million employees. Of these, 89 are basic pay settlements, while the remaining 37 are merit deals based on a measure of performance. We analyse the basic, across-the-board settlements and the merit-based deals below. XpertHR Benchmarking provides a fully searchable version of the data. Our analysis reveals:
Median pay award stable. In the three months to the end of September 2018 the median basic pay award stands at 2.5%, the same level as in the previous quarter.
Interquartile range unchanged. The middle half of all basic pay awards (the interquartile range) is worth between 2% and 3% and has been at the same level since the beginning of this year.
Pay awards higher than a year ago. In a matched sample analysis of pay awards (basic and performance-based deals in the three months to the end of September 2018), 59.1% are higher than a year ago, 22.7% are the same and 18.2% are lower.
Median paybill increase for merit-based awards is 2.5%. Overall, 29.4% of the awards are based on individual performance and the median paybill increase from which these awards are made is 2.5%.
Few pay freezes. Across the whole sample of pay awards, just 7.1% of settlements with an effective date in the past three months resulted in a pay freeze.
Public-sector awards still lower than private sector
In the 12 months to the end of September 2018, at a median of 2%, pay awards in the public sector continue to lag behind the rest of the economy, despite having increased by a whole percentage point compared with this time last year. However, the gap between the public and private sectors narrowed to 0.5 percentage points in April this year, with the private-sector median reflecting the whole economy figure at 2.5%, and this interval has been maintained ever since (see chart 2).
September is the third most popular month in the year for public-sector pay awards to take effect. Our sample of public-sector pay awards for the three months ending 30 September includes the award for school teachers in England and Wales, effective from 1 September. The award saw the unqualified teachers’ pay range and the main pay range uplifted by 3.5% at the minima and maxima, with lower increases for the upper pay range, leading practitioner pay range and leadership pay ranges and on allowances. The School Teachers’ Review Body had recommended a 3.5% increase to the minima and maxima of all pay and allowance ranges.
Another public-sector pay award with an effective date of 1 September is that made by the Police Remuneration Review Body, England and Wales, for police officers, including chief officers. They received a 2% basic increase on pay, London weighting and dog handlers’ allowance. The non-consolidated element of the award paid in 2017 has not been retained, against the recommendation of the pay review body.
In the private-sector, 53.9% of pay awards are worth between 2% and 3%. Of these, the most common pay increase is 2%, closely followed by 2.5%. Just 7.1% of pay settlements in the private-sector resulted in a pay freeze, while there were no pay freezes among our sample of public-sector awards in the three months ending September 2018.
The median pay award in the manufacturing-and-production sector over the past three months is worth 2.5%, unchanged from 2.5% for the previous rolling quarter. The interquartile range is the same as for the whole economy, with the lower quartile at 2% and the upper quartile at 3%. Among the higher pay deals recorded for the manufacturing-and-production sector is an award worth 4.75% for employees at an organisation in general manufacturing, effective from 1 August.
In the services sector, the median pay award is 2.4% and the middle half of all awards (interquartile range) are worth between 2% and 2.8%. One of the higher settlements was from an organisation in the information and communication sector, which awarded a 4% increase to employees earning less than £35,000.
September signals the start of autumn and the new pay bargaining year, a time when many organisations set their pay review budgets. According to analysis of the pay bargaining calendar, 13.7% of organisations use this month to review their pay for the coming year, while 20.2% set their budgets in October and a further 12.1% plan their pay awards in November.
Newly published pay forecasts survey 2018/2019 looks at the level of awards that employers expect to pay in the year to the end of August 2019. Nearly eight in 10 employee groups (79.8%) are forecast to receive a pay increase at the next review. In the year ahead, private-sector employers are predicting a median pay award of 2.4%. In the manufacturing-and-production sector, employers anticipate giving a median 2.5% pay rise, while in private-sector services the projected level of awards is lower, with the median at just 2%.
More than three in four employers (77.9%) cited inflation/cost of living as a key factor influencing pay awards. Despite the upward movement in pay levels this year, there is still a gap between employees’ take home pay and inflation. In September 2018 the retail prices index (RPI) inflation was 3.3%, while consumer prices index (CPI) was 2.4%.
In manufacturing and production the highest median, 3%, is recorded for the electricity, gas and water sector and is 0.4 percentage points higher than the median for the manufacturing-and-production sector as a whole, which stands at 2.6%.
In private-sector services, the transport and storage sector has the highest median at 2.8%, while the median for the whole sector is 2.3%. The lowest median recorded is 2% for the not-for-profit, professional and business services sectors and for the public sector as a whole.
Information taken from XpertHR