Pay awards at 3% but higher inflation nudges deals up
As the year draws to a close, the median level of pay settlements remains unchanged at 3%. But a greater proportion of pay awards are settling at the upper end of the pay range, with higher RPI inflation starting to make itself felt.
The IRS headline measure of pay increases - the median basic pay rise - stands at 3% in the three months to the end of November 2006, having held at this level throughout the 2006 calendar year.
Last month, we reported an upward move in the median pay award in the private sector, which had shifted to 3.4% in the rolling quarter to October 2006. With the addition of more settlements to the IRS pay databank, our median for the private sector has been revised back to 3% for the three months to November 2006. However, our analysis shows that upward pressures are continuing to impact on pay settlements. Comfortably over half of our sample (64%) of pay awards are worth 3% or more, with just under one-third (32%) paying an increase of 3.5% or above. At the other end of the spectrum, just 11% of awards are worth less than 2.5%.
Retail prices index (RPI) inflation increased again to 3.9% in the year to November 2006, its highest level since May 1998 and almost one percentage point above the median pay settlement level recorded by IRS. The impact of higher headline inflation can already be seen in the handful of inflation-linked awards settled during this period of the bargaining calendar. For example, 1,600 Eurostar employees netted a 4.6% pay rise in November, based on September's RPI increase of 3.6%, plus an additional 1%.
IRS pay databank
Our analysis this month covers the period from 1 September to 30 November 2006. IRS pay researchers have collected 60 pay awards settled during this period, covering a total of 315,258 employees. Our analysis of the 53 basic pay awards included finds that:
Pay deals remain at 3%. The median - midpoint in the range - basic pay increase stands at 3% in the three months to the end of November 2006, unchanged from the previous rolling quarter.
Wide range of pay awards. While the lower quartile - below which 25% of basic pay awards stand - is 2.5%, the level at which it has stood for every rolling quarter during 2006, the upper quartile - above which the top 25% of awards lie - was 3.5% in the three months to November 2006. This is the same as the upper quartile recorded for the three months to October, which has been revised downwards by 0.2 percentage points from our previous analysis. With 50% of all deals standing between 2.5% and 3.5%, the range of pay deals is wide compared with the tightly bunched pattern seen throughout most of 2006.
Private sector median shifts back to 3%. The median basic pay award in the private sector was 3% in the three months to November 2006. The median pay award for the previous rolling quarter has also been revised downwards to 3% from 3.4%. However, the interquartile range - between which half of all pay awards sit - stretches from 2.8% to 3.8%, indicating that the upward move in private sector pay awards has been maintained.
Manufacturing deals pegged at 3% but range shifts upwards. The median pay award in the manufacturing sector was 3% in the three months to November, unchanged from the previous rolling quarter. However, the upper quartile is 3.9%, up from 3.7% the previous rolling quarter and the lower quartile has also shifted upwards, to 2.8% in the three months to November 2006.
Almost half of pay deals higher than a year ago. A matched sample analysis of 31 pay awards, where both the current and previous settlements for the same employee group have been collected, reveals that almost half (48%) were higher than the previous year's award, just 23% were lower and 29% were worth the same.
This article was written by Sarah Welfare, editor, Pay and Benefits, IRS Employment Review, sarah.welfare@irseclipse.co.uk.
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Private sector pay awards, November 2005 to November 2006 |
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Upper quartile |
3.5 |
3.5 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
3.1 |
3.1 |
3.5 |
3.8 |
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Median increase |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
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Lower quartile |
2.7 |
2.7 |
2.5 |
2.5 |
2.5 |
2.5 |
2.5 |
2.5 |
2.5 |
2.5 |
2.5 |
2.6 |
2.8 |
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No. of pay reviews |
88 |
82 |
233 |
237 |
266 |
252 |
249 |
240 |
104 |
115 |
98 |
72 |
47 |
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State of play in key negotiations | ||
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SEPTEMBER 2006 |
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Police support staff, |
An initial offer of 2.2% from the employers' side of
the Police Staff Council (PSC) was rejected by the Transport and General
Workers' |
3% increase to all pay points from 1 September 2005. Standby allowance also increased by 3% (from £24.06 to £24.78). |
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NOVEMBER 2006 |
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Heating and Ventilation and Domestic Engineering JCC - craftworkers and manuals (30,000) |
A new three-year deal has been negotiated by the Heating and Ventilating Contractors' Association (HVCA) and Amicus, effective from 6 November 2006. The first stage of the award increases basic rates by 3.5%. Rates will be increased by a further 3.5% from September 2007 and 4% from October 2008. |
In the third and final stage of the previous three-year deal, basic industry rates and allowances were improved by 5.1% from 3 October 2005. |
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Land Rover - all at Gaydon and |
In the second stage of a two-year deal negotiated
with Amicus, GMB and the Transport and General Workers' Union, Land Rover
workers at Gaydon and |
The first stage of the deal paid the greater of 3% or £850 from 1 November 2005. |
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Pay review pattern, November 2005 to November 2006 | |||||||||||||||||
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THREE MONTHS TO THE END OF |
NOV '05 |
DEC |
JAN '06 |
FEB |
MAR |
APR |
MAY |
JUN |
JUL |
AUG |
SEP |
OCT |
NOV | ||||
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Percentage increase in basic pay | ||||||||||||||||
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Median increase by no. of pay reviews |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 | ||||
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Upper quartile |
3.5 |
3.5 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
3.1 |
3.0 |
3.5 |
3.5 | ||||
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Lower quartile |
2.5 |
2.7 |
2.5 |
2.5 |
2.5 |
2.5 |
2.5 |
2.5 |
2.5 |
2.5 |
2.5 |
2.5 |
2.5 | ||||
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Median increase by no. of employees |
2.5 |
3.1 |
3.1 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
3.1 |
3.1 |
3.0 |
3.0 |
3.0 | ||||
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Mean increase by no. of pay reviews |
3.2 |
3.1 |
2.8 |
2.8 |
2.8 |
2.8 |
2.8 |
2.8 |
2.8 |
3.1 |
3.1 |
3.4 |
3.3 | ||||
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No. of pay reviews |
96 |
82 |
236 |
242 |
271 |
301 |
296 |
287 |
112 |
131 |
120 |
86 |
53 | ||||
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the IRS headline measure of pay settlements - the median level of basic pay rise by number of pay reviews for each three-month period; and |
