Pay settlements sit at 2%

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Pay settlements continue to be worth a median 2%, according to the latest data from pay analysts XpertHR.

The latest findings are based on data from 106 organisations, who provided information on 138 pay awards made between 1 November 2015 and 31 January 2016.

XpertHR analyses pay settlement trends on a rolling quarterly basis; the median is now unchanged, at 2%, for 22 consecutive rolling quarters. In the latest analysis, a quarter of all pay settlements were made at exactly 2%, highlighting the domination of this figure and suggesting that we are unlikely to see any movement – in either direction – in the near future.

Few employers are making pay awards that are higher than the same group of employees received a year ago. Indeed, more than half (53%) of all pay awards in the current period are worth less than employees received at their previous pay review. Just 13% are higher this year than last, leaving the remainder worth the same in both years.

The pattern of pay awards by sector is also one of stability. In the private sector, the median pay award is worth 2%, whereas in the public sector it continues to sit at 1.5% (the latter figure is based on pay awards in the 12 months to the end of January 2016).

Within the private sector, manufacturing-and-production firms are recording 2% pay awards, as are those operating in private-sector services.

While the numbers clearly display the subdued nature of pay bargaining, the median pay award does outstrip inflation on both the CPI (0.3% in January 2016) and RPI (1.3%) measures, giving employees a real-terms increase in pay.

A separate survey conducted by XpertHR highlights the work that employers undertake to check that their pay rates are in line with the market. Around three-quarters of the 278 employers surveyed reported that they will be conducting a pay benchmarking exercise over the coming year. With so many organisations limiting pay rises to just 2%, many other employers are likely to follow suit.

However, recruitment pressures, skills shortages and retention of staff with specific skills are three key areas that employers are having to address through their reward structures. In many cases this means diverting resources from the paybill budget for the annual pay review to address such one-off issues, leaving limited resources for everyone else.

XpertHR pay and benefits editor Sheila Attwood said:

It seems likely that 2% will remain the benchmark pay award for employers throughout 2016. Factors such as skills shortages and the national living wage are placing additional pressure on organisations’ paybills this year, and many will look to address these within an overall 2% budget increase.