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Hold the champagne – wage growth is steady at 2%

Keep the fizz on ice for a little longer - it is not quite time to start popping those corks!

The latest wage figures have been released and reveal that pay conditions are staying broadly stable for Britain’s workers. The latest pay growth figures collected by XpertHR show a stable figure of two per cent for a second three-month period (June to August) in a row; however, one in seven businesses implemented a freeze on pay.

With a median calculation, of course, there will be employees in an upper tier enjoying a pay increase and those in the lowest tier experiencing a total freeze; therefore, the figures must be viewed with the usual caution that should be afforded to statistical analysis of any kind.

Examining the figures

Looking more closely beyond the headline figures, there are some interesting results at play. The data showed that over 50 per cent of staff received a lower pay award this year than during their pay review in 2015. Just above 20 per cent got slightly more, while nearly 29 per cent saw no change at all. The middle range of pay awards around the two per cent median was one to 2.3 per cent.

The impact of inflation

Inflation is currently running at less than one per cent, accordingly to official monthly figures; therefore, staff receiving anything above this will be getting a pay rise in real terms.

Minimum and living wage impacts

Businesses are likely to have exercised caution on the pay award front given the increases to the national minimum wage from 1 October, with plans for the national living wage also now rolling out. Some businesses have already claimed that these mandatory new wage limits will have a negative impact on their hiring and staff retention plans, possibly leading to job losses.

The median award of two per cent was seen particularly strongly in the production and manufacturing industries and the service industries; meanwhile, the public sector saw a median award of one per cent.

The pension reform considerations

Employees in the private sector will also be starting to benefit from the new pension reforms, which oblige businesses to enrol their workers in a pension scheme and make contributions alongside those of the employee. The scheme has attracted controversy and has been received with mixed enthusiasm from the business community; however, with private sector pensions look set for a funding crisis, the government is committed to seeing the policy through and fining businesses that fail to comply.

Conclusions

The report’s authors noted a wide spread of award level on either side of the two per cent median, with private sector workers continuing to see stronger growth than those in the public sector. This situation is expected to persist during the ongoing pay restraint strategy to which the May government is continuing to commit. With private sector workers up in arms about public sector pensions, this will certainly be welcomed by those struggling with frozen pay in commercial organisations.

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