Pay Awards Remain Muted and Below Inflation Over 2014

Annual pay rises are delivering a median 2.5% increase according to analysis, by UK online HR resource XpertHR, of 215 pay settlements effective in the three months to the end of March 2014. This figure matches the 2.5% retail prices index (RPI) inflation figure for March 2014. Over 2013 as a whole pay settlements were worth a median 2%, while RPI stood at 2.7%.

RPI is the inflation measure most commonly used by employees and employers to gauge the value of any pay increase. Consumer prices index (RPI) inflation (the Government’s targeted measure) is used less often by employers – and rarely by employees as it excludes housing costs.

Over 2014 as a whole, pay settlements are forecast by XpertHR to be worth 2.5% for private-sector employees, while many public sector employees will receive an average 1% rise. Inflation over the year is expected by economists to average 2.8%. On the RPI measure, pay awards have been worth less than inflation since December 2009, and 2014 is set to lead to a record fifth year of wages falling in real terms.

Key findings for pay awards in the three months to the end of March 2014 include that the median pay award stands at 2.5%, the middle half of deals fall between 2.0% and 2.8% and less than one pay award in every 10 (8.2%) is a pay freeze.

XpertHR Pay and Benefits editor Sheila Attwood said: “We are yet to see a return to real terms wages growth. Pay settlement levels remain subdued – at just 1% on average in the public sector, and 2.5% in the private sector – and an early indication of pay awards concluding in April shows that this level of awards is likely to persist. Over 2014 as a whole pay settlements are likely to fall below RPI inflation.”