There has been much excitement over the issue of pay freezes over the past month, with one employers' organisation even suggesting that most companies planned to freeze or even cut salaries during 2009.
Other significant developments this month have included:
- a fall in the Retail Prices Index to -0.4% - the first time it has been in negative territory since the early 1960s;
- a decline in UK GDP of 1.9% in the first quarter of 2009; and
- a rise in the unemployment rate to 6.6% (up from 5.2% a year ago).
Key bargaining statistics on pay, prices and employment for May 2009.
Against this backdrop it comes as no surprise that a British Chambers of Commerce survey found that 58% of companies were planning to freeze wages this year while 12% were planning pay cuts. The report is based on a survey of 400 companies.
But "planning to..." and doing it are two different things, and an ongoing survey of employers who have settled pay in the current suggests that pay freezes remain a minority practice. Data collected by pay specialists IRS (which, like CELRE is part of the XpertHR Group) shows that one in four settlements (26%) were set at zero in the three months to April.
In fact, although the Retail Prices Index has now dropped below zero, the median pay settlement in the same period was 2.8%, while one in four settlements was at 3.8% or more (see chart).
That said, there are developments still in the pipeline which may bring the going rate of pay settlements down further as the year goes on.
Many organisations which usually have January to April pay settlement dates have simply deferred a decision until later in the year. Many are presumably already facing difficult trading conditions which may translate into pay freezes unless things improve.
Public sector awards have started to fall, with doctors and dentists getting just 1.5%, other NHS staff covered by Agenda for Change getting 2.4%, and the armed forces receiving 2.8%. Local government workers have been offered 0.5% - with a warning that the offer will be withdrawn entirely if agreement has not been reached by 1 June.
Also in the pipeline is the probability of a very small increase in the National Minimum Wage this October. An announcement has already been deferred twice and is now expected in the week beginning 11 May.
Each year's increase in the National Minimum Wage has a significant impact on pay rises in the wider economy during the autumn. Last October's 3.8% set a going rate for settlements which held sway for three months in the run-up to Christmas.
Last month's Budget, meanwhile was of more concern to those dealing with senior executive pay.
Among the key announcements were:
- a new top rate of income tax for those earning more than £150,000 set at 50p from April 2010;
- an end to personal allowances for those earning more than £100,000 from April 2010; and
- a cut in tax relief on pensions for those earning more than £150,000.
Meanwhile, with the busiest month in the pay setting calendar now having come to an end, all eyes will be on headline figures to emerge from April settlements. More on that next month.
Key bargaining statistics on pay, prices and employment for May 2009.
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