Pay awards are at their most stable level for a year, according to the latest IRS analysis (subscription required) of pay awards. Our headline measure of pay awards has stood at 3.5% for the rolling quarters ending January, February and March this year. The last time pay awards were unchanged for three months in a row was in the same period a year ago, where they also stood at 3.5%.

It seems that in the early part of 2008 pay-setters have been unable to lower the level of pay awards, particularly as retail prices index (RPI) inflation remains high (subscription required).

However, provisional analysis suggests that the period of pay stability may be over and that pay awards are heading for a fall. The median pay award among our sample of 70 basic deals effective in April 2008 is just 3%.

Fewer than one-third (30.5%) of April pay awards collected to date are worth more than the same group of employees received a year ago. This compares with almost half (48.3%) of pay awards in the three months to the end of March paying more than in the previous year.

A key influence on the overall level of pay awards in the coming months will be settlements in the public sector. The first April pay awards in the public sector have now been concluded, most notably for employees covered the independent pay review bodies. In several cases, the increases to be paid in 2008 will be higher than received the previous year, but markedly below increases paid by private sector employers.