PAYtrends in 2011

At the start of each year we are often asked about pay trends over the coming year and 2011 is no exception. Given the economic climate, employers are particularly keen to see if their arrangements are comparable with the external market.

The Retail Price Index (RPI) remains high (above the 4.5% mark), which increases the pressure on pay bargaining. The government expects this to drop to around 3.5% in the second quarter of 2011. However, a number of employers have commented that they expect increases in fuel and VAT to keep RPI high for the near future. The government counters this by saying the impact of such factors is likely to diminish as 2011 progresses.

Nevertheless, with the high RPI figures, limited or no pay increases in the last two years and, in some cases, unionised employee populations; over 90% of employers expect pay to increase in 2011. Having said this though, employers expect it to grow more slowly than prices in 2011; generally by between 2% and 3% (compared to 1.5% to 2.5% in 2010). For unionised populations, this may be marginally higher (perhaps up to a percentage point).

Over the past 12 months we have tracked budgeted and actual pay increases and in most cases they have mirrored each other. Given this, a general pay increase of 2% to 3% appears sensible for 2011, with the caveat that variations exist between different industries and types of work (for example, specialist and frontline positions).

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