With the credit crunch having recently passed its first anniversary (external website), you might expect its effects to be most keenly felt at its epicentre, the finance sector. It is therefore notable that the annual IRS analysis of finance sector reward trends (subscription required) finds pay awards in the sector surging ahead, even as the credit crunch bites.
The median paybill increase for all-merit pay awards in the finance sector is worth 4% for the year to 31 May 2008, up from 3.6% one year previously. This continues the upward trend seen in the past two years, and suggests that finance sector employers are pumping more money into variable reward as the credit crunch intensifies, to ensure top performance in trying circumstances.
But this is not to suggest that City pay is immune from the effects of the credit crunch. Many commentators expect the full impact to be felt when bonuses for 2008 are paid out, at the start of 2009.
Speaking to IRS, Kevin Green, chief executive at recruitment industry representative body the Recruitment and Employment Confederation says that "things will get worse before they get better. We expect to see much smaller pay rises over the next year. But financial institutions will make their biggest savings at the next bonus round, which will be particularly subdued."
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