The median pay award across the whole economy rose to 2.5% in the three months to January 2018, according to the latest monitoring figures from IDR. This is the highest we have seen since the quarter to December 2015, when many firms pushed up pay rates in advance of the introduction of the Government’s National Living Wage the following April. In the two years since, the median pay award has only risen above 2% on three occasions.
The last three months of 2017 produced an increase in pay rises across the economy, with the median rising to 2.3%. Awards in the private sector show a median of 2.5% for this period, which is higher than the overall median of 2.2% for this sector during 2017. The elevated median this time is the product of some higher awards, for instance at EasyJet and Ford.
Incomes Data Research has monitored 667 pay reviews for 2017, covering over 6,900,000 employees. The median increase for the whole economy remained the same at 2% from the previous year. The private sector however has risen from 2% to 2.2% in 2017. This has been especially noticeable at the lower quartile which showed an increase of 0.5%, whereas the upper quartile fell slightly from 2.78% to 2.75%. Across the whole economy, the lower quartile increased by 0.5% and the upper quartile rose by 0.1%, suggesting modest upwards pressure on pay, which may be due to higher inflation rates across 2017.
Our latest survey of pay and conditions for engineering workers suggests stronger pay growth for manual workers than for white-collar staff and managers, driven by higher – often negotiated – pay awards. Recruitment pressures have also played a role, as well as staff turnover among operators.
According to our most recent detailed quarterly analysis, the median pay award across the whole economy was 2% in the three months to October 2017, according to the latest monitoring figures from IDR. See the full quarterly analysis here.
This year’s survey of pay and conditions in contact centres has found that median pay settlements have increased slightly this year. Meanwhile, last year’s improvements in recruitment and retention may only have been temporary. Continue reading Call centre employers start to see upward pay pressure
All of our panel of City economists see RPI inflation peaking in the next month or two and thereafter coming slowly down. Our rounded average of the predictions from seven City forecasting bodies shows the RPI, which is currently at 4% for the year to October, falling to 3.6% in the year to February. The February figure will be released in mid-March and as such will be the extant measure when many companies’ April 2018 pay reviews take place.
The Budget on 22 November sparked a debate over the prospects for wage growth over the coming period. The Bank of England is on one side, while on the other stand the government’s Office for Budgetary Responsibility (OBR) and the Institute for Fiscal Studies (IFS).
Earlier, in announcing its decision to raise interest rates marginally on 2 November, the Bank argued that while pay increases are currently subdued – mostly because employment has been growing in lower-paid occupations and industries – it expected earnings growth to strengthen during 2018. This will occur, the Bank said, ‘as the tightening labour market starts to put more widespread upward pressure on wage demands’.
The Bank’s position is perhaps a logical corollary of its decision to raise interest rates, a move designed to reduce the potential for over-heating in the economy. But it nevertheless highlights a number of signs of increasing wage demands.
One of these is greater ‘churn’ in the labour market, with the proportion of people moving from one job to another close to the pre-recession rate. The Bank thinks this might indicate confidence among workers about their prospects in the labour market, which could increase pressure on employers to retain them by raising wages.
The Bank’s agents have also found employers are more willing to award bigger pay rises. In their November report, they found recruitment difficulties had increased, contributing to a slight increase in pay growth, with expectations that settlements could be clustered around 2.5% to 3.5% in 2018, compared with 2% to 3% this year.
Our own research on pay in two key sectors tends to support the Bank’s findings. In call centres, pay settlements have increased slightly, and recruitment and retention problems have worsened. Meanwhile in engineering, pay growth for shopfloor staff is greater than for white-collar workers and managers, with recruitment pressures playing a part.
However the Bank also points to a potential offset to its predictions of wage growth, namely that employers’ uncertainty over the economic outlook could affect their willingness to raise pay until they have more clarity about future demand for their products and services.
This is where the IFS and the OBR come in, warning of bad times around the corner, in an echo of the old Noel Coward song. In the wake of the Budget, both bodies think economic and productivity growth will be weaker than before and have downgraded their predictions for earnings growth. They could be right but they may not be. While the Budget increased spending and reduced tax, the overall policy position is still one of austerity, and the OBR and IFS positions reflect this.
In at least two respects though, the Budget has contributed to potential upward pressure on pay. The first is the chancellor’s announcement of a 4.4% rise in the National Living Wage, from £7.50 to £7.83 from 1 April 2018. The second is his reiteration of the government’s intention to ‘move away from’ the 1% public sector pay cap and a promise to fund an NHS pay deal linked to productivity gains, and justified on recruitment and retention grounds. Any NHS award will influence claims in the public sector, and could be a trigger for a more generalised catch-up after years of restraint, perhaps leading to spillover effects in the private sector.
Company cars are a popular employee benefit, although most schemes only benefit managers or those needing a vehicle to undertake their duties. In 2016, company-owned cars accounted for 9.0% of all registered vehicles.
The Government has accepted the Low Pay Commission’s recommendation for a 4.4% increase in the National Living Wage which takes the rate for workers aged 25 and over from £7.50 to £7.83 an hour, effective from 1 April.
There have also been larger increases to the statutory minimum rates for younger workers, in an effort to close the gap between the statutory rate for ‘adult’ workers and that for workers aged under 25. Continue reading National Living Wage to rise by 4.4% in April