Latest pay data from IRS for XpertHR show that pay freezes remain widespread in 2010. The headline pay award has collapsed back to its all-time low of nil (subscription required) over the three months to 31 January 2010, according to latest IRS data.

Pay awards first plunged to nil over the three month periods ending in July and August 2010. However, retail prices index (RPI) inflation was firmly parked in negative territory at that time, meaning that a pay freeze could in some ways be argued to represent a pay increase.

In contrast, the current return of pay freezes comes as RPI is rising rapidly. RPI currently stands at 3.7%, meaning that the median pay award is effectively 3.7 percentage points below inflation. Although RPI is expected to fall back later this year, the latest round-up of inflation forecasts compiled by IRS (subscription required) suggests this fall will be shallow. IRS says that "RPI will remain comfortably above 3% over 2010 as a whole."

But weak economic recovery could well result in 2010 pay awards remaining stuck below inflation.

The February 2010 Inflation Report (external website) from the Bank of England highlighted the critical role that workers' willingness to accept pay restraint will play in shoring up employment levels, which are in turn essential for sustained economic recovery. It said:

The outlook for employment will also depend on whether employees attempt to resist further restraint in real take-home pay.

Attention will therefore be keenly focused on workers' and unions' expectations as the busiest part of the 2010 pay bargaining calendar unfolds. And there are signs that pay restraint may not be so readily accepted this year:

• TUC deputy general secretary Frances O'Grady has asserted that unions are willing to push for higher pay increases in 2010 at her speech to the TUC pay bargaining conference.
• Last week saw an estimated 270,000 civil servants striking in protest at planned cuts to redundancy pay - an action described by the Telegraph as "the biggest outbreak of industrial unrest in the service since 1987" (external website).
• British Airways cabin crews are to stage seven days of strikes over the coming weeks (external website) in protest at protracted negotations regarding pay, allowances and proposed redundancies.

David Cameron, meanwhile, has promised a hardline stance on the unions if the Conservatives are returned to power in the 2010 general election.

Pay awards consequently look set to represent one of the most crucial employment issues for 2010, with widespread implications for workers and employers, and for the strength of economic recovery.