Pay awards spike to highest level

New data has indicated that pay awards have started to increase in the three months to the end of May 2021, with the median reaching its highest level for six months.

According to XpertHR research, between March and May of this year the median pay award was two percent, 0.1 percentage points higher than the figure recorded last month, reaching back to the levels last seen at the end of November 2020.

Commenting on the findings, Sheila Attwood, pay and benefits editor at Xpert HR, shared that a two percent median award “might be the ceiling for now”.

“Whilst pay awards have edged up over the past few months, it feels as though a two percent median award might be the ceiling for now,” she explained.

“While some employers are addressing labour shortages through higher starting salaries, when it comes to annual pay reviews many organisations remain unable to offer much or any increase.”

Pay freezes continue

Despite this progress, XpertHR revealed that pay freezes are still evident. It noted that there is a higher proportion of pay freezes in the services sector, at 20.6% of the total sample from the sector than compared with manufacturing and production, where the figure is at 10.7%.

In addition, the research pointed out that the value of pay awards is falling behind the cost of living. In May 2021, retail prices index (RPI) inflation increased to 3.3%, while consumer prices index (CPI) inflation increased to 2.1% (above the Bank of England’s two percent target).

The headline pay award has now been worth less than inflation on the RPI measure for six rolling quarters, with the current gap of 1.3 percentage points – the largest since pay rewards fell to nil in the three months to the end of July 2020.

XpertHR also shared that pay awards have fallen behind CPI for the first time since the three months to the end of July 2020.

However, on an annual measure, pay awards in the public sector (at a median 2.5%) are now more than double the value of the private sector, where a 1.2% median pay award was recorded in the year to the end of May 2021. This figure is still below the figure of 2.2% recorded for the year to end in May 2020.