Pay awards drop for the first time since September 2016

XpertHR’s analysis of 51 pay deals made between 1 May and 31 July showed that the median value of settlements fell for the first time in almost two years, having either remained steady or risen every month since September 2016.

Settlements had remained at an average of 2.5% for the first six months of this year, with 2% being the most common award.  Pay awards in the three months to July dropped slightly to 2.3%, but still remained higher than the amount recorded a year ago (2%).

This drop is in line with the Office for National Statistics’ latest average weekly earnings data, which showed that earnings growth fell to 2.4% in June. Inflation has also fallen, with the July 2018 Retail Price Index (RPI) figure dropping to 3.2% – the lowest since March 2017.

However, 65.3% of settlements were still  higher than the award the same group of employees received at their previous pay review. A quarter of pay awards were worth 3% or more.

XpertHR pay and benefits editor Sheila Attwood said: “Although we have recorded a small dip in the level of pay awards this month, they are still running higher than a year ago and the majority of employers are rewarding employees with a greater increase than at their previous pay review.”

Pay awards in the manufacturing sector were 2.9% on average in the three-month period, compared with 2% in the private sector.

The median pay settlement in the private sector was 2.5% in the 12 months to the end of July 2018, compared with 2% in the public sector.

Public sector pay is likely to increase further, with pay rises of between 2% and 3.5% for more than a million workers.  XpertHR said the number of pay deals is likely to reduce towards the end of the year, as more than seven in 10 pay settlements are effective in the first four months of each year.

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