Tim Kellett

PAYdata Blog, 01 February 2012
   

Our customers often ask us for our views on market pay settlements around this time of the year.

It is interesting to note six months ago that pay predictions were more positive than now.  At the time, though still flat, the economy was yet to experience the eurozone crisis, wage settlements for the last twelve months were still very restricted; and inflation (RPI and CPI) was around 5%.

Into the fourth quarter of 2011 and it became increasingly clear that the recovery was not going to happen in 2012 and margins would remain tight.  Coupled with this, inflation began falling from September 2011 onwards.  The government predicts that it will continue to fall in 2012, although it is debatable whether it will reach the governments’ target of 2%.

As a leading benchmarking data provider, we continually track pay awards and have seen them continue to lag well behind inflation.  Over the last 6 months (including January), we have seen most awards to be between 2% and 3%.  However, the number of organisations applying a pay freeze has increased from around 8% last year to around 15% in the last six months.

We continue to see sector differences.  Whilst many retailers have awarded between 2% and 2.5% in the last six months, the hi-tech sector has seen marginally higher increases of between 2.5% and over 3%.  In Construction and Business Services, awards have been more constrained (largely around the 1.5% to 2% mark) and pay freezes have been more common.

From what we have seen, we do not expect this to change significantly over the course of 2012.  Although pay pressures are still there from employees and their representatives, most organisations tell us they will continue to restrict their 2012 pay awards to between 2% and 3%.

Having said this, many state that they are experiencing recruitment and retention pressures for positions with specialist / key skills.  For this reason, we expect employers to continue targeting their pay awards to high performing staff or those with scarce skills rather than applying across-the-board increases.

If you would like to know more about pay and reward trends in your industry or generally, please contact Tim Kellett at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

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