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Hold the champagne – pay awards are now at a six year low

Figures show pay settlements are at lowest quarterly level since 2010, despite significant increases in the NMW

While the minimum wage rose to £6.95 per hour in October 2016 for 21-24 year olds (a 3.7% increase), this did not affect the pay data, as most employers paid the new national living wage of £7.20 to all staff, including those under the age of 25.

The private sector enjoyed slightly higher pay awards than the rest of the country, at 1.8%, in comparison to public sector awards of around 1%. However, the median basic pay award was only 1.5%, a 0.2 percentage point decrease from the previous quarter.

In his autumn statement last year, Chancellor Philip Hammond set out further changes to the new minimum wage rates applicable from April 2017. Those aged 25 years and over will receive a national living wage of £7.50 per hour, a 4.2% increase and significantly more than pay awards nationally. The national minimum wage for workers aged 21-24 will see only a 1.4% increase to £7.05 per hour – but when the October 2016 increase is also taken into account, this still gives workers a substantially greater increase than most.

Sampling, by Xpert HR, of 78 basic pay awards across various sectors showed that in the quarter to 30th October 2016, the interquartile range of pay awards was worth between 1% and 2%. 40% of employees received a lower pay award than the previous year, with 25% getting more, and 33.3% remaining the same.

Private sector employers in some services reported a median 2% increase, with the figure decreasing to 1% for those in the manufacturing and production sectors. The 2% median pay award in the private sector in the 12 months ending October 2016 is still 1% higher than that in the public sector.

The Low Pay Commission (LPC) suggested in Autumn 2016 that the national living wage will be £8.61 by April 2020, a decrease from previous forecasts of £9.16 in Spring 2016, and £9.35 in July 2015. This is attributable to slowed earnings growth. Sheila Attwood, pay and benefits editor for XpertHR reported that the estimate was 60% of median earnings in 2020, and would result in a living wage of £8.61 in cash terms, with an interquartile range of £8.50 to £8.73.

Bearing these figures in mind, an employee on the national living wage in April 2017 will now be £5.60 a week worse off (based on a 40 hour week) than they would have been, had earnings grown at the rate they were growing at in April 2016. This would mean a full time worker earning over £290 a year less.

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