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Pay awards collapse to record low of 1.3%

Pay awards collapse to record low of 1.3%

Pay awards for UK employees have slumped to their lowest level on record, led by a collapse in private sector pay deals, according to latest analysis from Industrial Relations Services (IRS) for XpertHR.

The median basic pay rise in the three months to 31 May 2009 is worth just 1.3%: the lowest headline figure recorded by IRS since it began collecting pay settlement data in 1971.

The previous record for low pay awards was a 2% median recorded between August and December 1993.

The main downward influence on the IRS headline pay award is from extremely weak private sector pay deals. Our latest data show the lowest median ever recorded for basic pay deals in the private sector, at 0.9% in the three months to 31 May 2009. This is down from 1% for the three months ending 30 April 2009.

But there is a slight silver lining to these otherwise bleak pay figures. Pay awards may be at a record low, but when measured against negative retail prices index (RPI) inflation, they actually compare more favourably to rises in the cost of living than they did a year ago, when the value of higher pay rises was undermined by high inflation. Our headline pay award, at 1.3%, is effectively 2.4 percentage points above RPI (currently at -1.1%).

Key details
In the three months to 31 May 2009, IRS collected details of 232 pay awards, covering 2.3 million-plus employees. Our headline figures are based on analysis of 195 basic pay awards.
 Pay awards fall to record low of 1.3%. The median basic pay award, at 1.3% for the three months to 31 May 2009, is the lowest ever recorded by IRS (but is in line with the revised figure for April 2009, which previously stood at 1.5%). The lower quartile pay award is unchanged at nil, while the upper quartile has fallen to 2.5%.
 More than one-third of pay awards is a pay freeze. Pay freezes or cuts now account for 35% of the total number of pay awards (both basic and performance-based) for the three months to 31 May 2009, up from 32% last month. Only three of these deals are pay cuts, with the remainder awarding no pay increase. Pay freezes or cuts now account for 40% of all private sector pay awards.
 Private sector deals slump below 1%. Private sector pay deals hit a record low this month. The headline private sector pay award was worth only 0.9% in the three months to 31 May 2009, down from 1% in the previous rolling quarter.
 Public sector deals holding up. Public sector pay awards remain buoyant. The headline public sector pay awards was 2.5% over the 12 months to May 2009, unchanged from the figure for the 12 months to April 2009.
 Four-fifths of deals worth less than previous year. Some 81% of basic pay increases are lower than the previous award. One in 12 (8%) is higher than the previous year and the remaining 11% are the same in value.

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