The headline measure of basic pay awards has held firm at 3.5% in the three months to August 2008, according to the latest Industrial Relations Services data (subscription required), published to XpertHR today.
Despite the continued strength of pay settlements through uncertain economic times, fears of a wage-price spiral emerging have reduced.
Headline inflation (subscription required), as measured by the retail prices index (RPI) fell to 4.8% in August (from 5% in July). The gap between pay awards and inflation has fallen to 1.3 percentage points, from a high of 1.5 percentage points last month.
As IRS Pay and Benefits Bulletin editor Sheila Attwood notes: "Private sector pay awards are heavily influenced by movements in the retail prices index inflation measure. However, negotiators will often look to set their pay awards based on a longer-term trend in inflation. As such, while RPI fell in August, pay setters will be looking at how this downward path progresses before deciding the extent to which pay settlement levels can also fall."
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