Pay trends May 2019: First April deals confirm stable pay picture
Author: Rachel Sharp
As the first pay deals in the key month of April are included in the XpertHR analysis, the median remains stable at the 2.5% level seen over the first quarter of 2019.
- In the three months to the end of April 2019 the median pay award remains at 2.5%.
- Close to half of groups in a matched sample have received a lower award than in the previous year.
- Pay awards in both manufacturing and production and private-sector services are in line with the level predicted in our recent survey of pay forecasts.
The first analysis that includes pay awards effective in the key month of April confirms the provisional findings revealed last month, with the headline basic award standing at 2.5%, the same as in each rolling quarter this year. Pay settlements are also at the same level as they were in this period last year, before a period of volatility that saw the median dropping below 2.5% for the latter months of 2018.
Although the median is stable, the range of pay awards has dipped slightly, with both the upper quartile and the lower quartile falling slightly compared with the previous rolling quarter. Around half of the bargaining groups have received a lower award than in the previous year.
Key findings from the XpertHR pay databank
XpertHR pay researchers have collected details of 250 pay awards with effective dates in the three months to 30 April 2019, covering more than 3.3 million employees. Among these, 47 are based on a measure of individual performance and are analysed separately. Our headline findings are based on 203 basic pay settlements (12 of which include an additional element based on performance). XpertHR benchmarking provides a fully searchable version of the data. Our analysis reveals the following:
- Median pay award unchanged. The median basic pay increase is worth 2.5%, unchanged for four consecutive rolling quarters.
- Most common award is 2.5%. Among the 203 basic pay awards, more than a quarter (26.1%) are set at 2.5%, making this the most common, as well as the median, award.
- Range of awards dips. The middle half of pay awards are worth between 2% (the lower quartile, at or below which the bottom quarter of deals lies) and 2.8% (the upper quartile). This is a slightly lower range than the 2.1% to 3% seen for the previous two quarters.
- Almost half of awards are lower than the previous year. Among a matched sample (comprising both basic and performance-based awards), 45.9% of groups have received a lower award than in the previous review. Three in 10 (29.6%) have received a higher award, with the remaining quarter (24.5%) seeing awards at the same level.
- Performance-based awards worth slightly more than basic. Among the 47 pay awards in the sample that are based on performance, the median paybill increase is 2.6%, marginally ahead of the 2.5% basic median.
- Proportion of pay freezes remains low. Just 6.8% of the bargaining groups in the current quarterly sample saw no increase in their pay.
Chart 1: Pay review pattern - whole economy, April 2018 to April 2019
See note below.
Source: XpertHR pay databank.
Strong start to public-sector pay round
More than half of the public-sector pay reviews added to the XpertHR pay databank each year have effective dates in April, and the current quarterly sample includes a crop of the earlier deals settled as the main pay round gets under way.
Of the 27 public-sector basic pay reviews recorded so far in 2019 (all with April review dates), the median increase is 2.3%, only slightly below the 2.5% recorded in the year to date for the whole economy (see table 1). The awards recorded are concentrated in local government. Among the higher of these awards are the increases made to three bargaining groups in Scotland, where groups covering around 189,000 services employees, 2,000 craft operatives and 1,000 chief officials have each received pay rises of 3% effective from 1 April 2019 in the second stages of three-year deals.
Staff on NHS Agenda for Change terms and conditions in England, Wales and Scotland are in the second year of long-term deals, so their pay awards effective from 1 April 2019 have already been determined (for details of the pay awards collected so far, see the Pay awards by industry pages). However, the 2019 pay awards for several other groups that come under the remit of the independent public-sector pay review bodies, including members of the armed forces, prison service staff in England and Wales and NHS hospital doctors and dentists, will be delayed because the review body reports were not due to be submitted until after the April review dates. The pay guidance for the civil service has also not yet been published, so pay negotiations in government departments are not yet under way.
Members of Parliament at Westminster, whose pay rise is based on the increase in public-sector average weekly earnings in the three months to the previous October, were awarded an increase of 2.7% from 1 April 2019.
In the 12 months to the end of April 2019 the median award in the public sector stands at 2%, unchanged on the rolling year to the end of March 2019 and each rolling year since the 12 months to April 2018. The middle half of awards are worth between 1.5% and 3%, a slightly wider spread than the 1.8% to 3% seen over the previous six rolling years. In the private sector over the same period the median remains unchanged at 2.5% (see chart 2).
On a quarterly basis, private-sector pay awards are also worth 2.5% at the median in the three months to the end of April 2019.
Chart 2: Pay review pattern - private and public sectors, April 2018 to April 2019
See note below.
Source: XpertHR pay databank.
Services awards dominate sample
Pay awards effective in January - a month favoured by organisations in the manufacturing-and-production sector - have now fallen out of our calculation, changing the sectoral balance of the sample in favour of the services sector (which includes the public sector). Around seven in 10 of the current quarterly sample of pay awards come from the services sector, where not only public-sector employers but also those in private-sector services most commonly have an April review date (of the total sample recorded in the rolling quarter, more than eight in 10 awards are effective in April).
The median pay award in the services sector in the three months to 30 April 2019 is worth 2.5% for the fourth consecutive rolling quarter, with the middle half of deals worth between 2% and 2.8%. The median figure for the manufacturing-and-production sector is also 2.5%, with the same interquartile range; the median figure here is unchanged for the fifth consecutive rolling quarter.
This is a significant shift from the position of the two sectors in the same period last year, when pay awards in manufacturing and production had moved up to 2.9% at the median, ahead of the 2.3% recorded in the services sector. The manufacturing-and-production sector maintained a lead above the services sector until the start of 2019 (see chart 3).
Compared with the services sector, significantly more pay awards in the matched sample among manufacturing-and-production bargaining groups are lower than the same group received in the previous review - this is the case for 54.8% (compared with 41.8% in the services sector).
Chart 3: Pay review pattern - services, manufacturing and private sector, April 2018 to April 2019
See note below.
Source: XpertHR pay databank.
Statutory minimum wages uplifted in April
The hourly rates of the national minimum wage and national living wage (which applies to workers aged 25 or over) are uplifted in April each year. From 1 April 2019, the rate of the national minimum wage for workers aged at least 21 but under 25 increased by 4.3% to £7.70 per hour, and the national living wage by 4.9% to £8.21 per hour.
There are a handful of organisations among the current sample that recorded a rise for employees on the lowest-paid adult grade (the increase that is included on the XpertHR databank) in line with the uplift to the national living wage. In most cases where the lowest-paid employees received the statutory increases, those on salaries above the minimum received a lower percentage increase.
On 22 May 2019, the Office for National Statistics released the inflation figures for April 2019. Inflation on the retail prices index (RPI) measure rose to 3%, up from 2.4% in March, while consumer prices index (CPI) inflation was also higher, at 2.1% (compared with 1.9% in March).
The XpertHR headline pay award has therefore fallen behind RPI inflation by 0.5 percentage points, after seeing a narrow lead of 0.1 percentage point last month and running level in the previous two rolling quarters (the three months to January 2019 and the three months to February 2019). Prior to this, the headline award had been below inflation in each rolling quarter from September 2016 to December 2018.
Although it is relatively unusual to find pay awards with a direct link to a measure of inflation, there are some examples included in the current sample of deals. Among these is the award made to more than 2,700 employees in the collective bargaining group of Dwr Cymru (Welsh Water), where in the final stage of a long-term deal the increase was based on the greater of 1.5% or the rate of CPI inflation in December 2018, resulting in an award of 2.1%. The same increase was approved for the management group at the organisation.
2019 pay awards to date
Over the year so far, few industry sectors have seen the median pay award stray far from the 2.5% figure found in the broad manufacturing-and-production and private-sector services sectors (see table 1). This is broadly in line with the findings of our survey of pay forecasts for 2019 among private-sector employers.
Table 1: Pay awards by sector, 2019
|Sector (sample size)1||Lower quartile, %||Median basic pay award, %||Upper quartile, %|
1Figures are not provided for sectors where the sample is too small, but are included in total figures.
|Manufacturing and production|
|Chemicals, pharmaceuticals and oil (23)||2.0||2.7||2.8|
|Electricity, gas and water (11)||2.0||2.1||2.8|
|Engineering and metals (21)||2.3||2.5||3.0|
|General manufacturing (69)||2.0||2.5||2.6|
|Paper and printing (11)||2.5||2.5||2.6|
|Total manufacturing and production (162)||2.0||2.5||2.8|
|Hotels, catering and leisure (41)||2.3||2.5||2.5|
|Information and communication (43)||2.5||2.5||3.0|
|Professional and business services (39)||2.0||2.5||3.0|
|Retail and wholesale (16)||1.1||2.3||2.7|
|Transport and storage (24)||2.1||2.8||3.0|
|Total private-sector services (216)||2.0||2.5||3.0|
|Local government (18)||2.0||2.3||2.6|
|Total public sector (27)||2.0||2.3||2.8|
|All economy (405)||2.0||2.5||3.0|
Just completed a pay review? Take part in our research
Has your organisation recently settled its annual pay review?
If so, please get in touch so that we can add your organisation's award to the database we use to produce our XpertHR monthly analysis of pay deals.
You can submit confidential details of your organisation's latest settlement for inclusion in the XpertHR pay databank by completing the online form. Alternatively, please email Sheila Attwood if you are happy to share this information with us, and we will call you to go through the details.
Note on the charts
The charts show the pattern of basic pay reviews calculated on a rolling three-month or 12-month basis.
- Chart 1 shows the median, upper and lower quartile settlements for the whole economy over three-month rolling periods.
- Chart 2 shows the median basic pay award in the public and private sectors over rolling 12-month periods.
- Chart 3 shows the median basic pay award in the services, manufacturing and private sector over rolling three-month periods.
They are based on information from around 1,200 manufacturing and services pay reviews in the public and private sectors. For each pay review, XpertHR uses the annualised percentage increase received by the lowest adult grade, excluding any additional payments that are over and above the basic increase, such as consolidation, incremental rises and merit pay.
- The median increase is the midpoint in the total spread - that is, the percentage at which half of the pay reviews are at the same or a higher value and half are at the same or a lower value.
- The bottom 25% of pay reviews fall at or below the lower quartile and the top 25% at or above the upper quartile. Thus, half of pay reviews provide for rises between the upper and lower quartiles.
What should I do now?
- Check Pay awards by industry to see a breakdown by industry of all pay awards covered by XpertHR.
- See details of expected pay awards over the year in our survey of Forecasts for pay awards in 2019.
- Understand How to use the pay resources on XpertHR, including the pay settlement monitoring service, and salary surveys.