Private sector pay to trail inflation

Private sector pay is set to trail inflation, according to the latest analysis of pay settlements from IDSPay.co.uk.

Private sector pay is set to trail inflation, according to the latest analysis of pay settlements from IDSPay.co.uk.

With most of the public sector likely to endure pay freezes in 2011, the organisation says the majority of employers awarded pay increases between 2 and 3 per cent in the last three months of 2010.

The proportion of organisations freezing pay dropped to 9 per cent of awards during the three months to October 2010, the lowest figure since the end of 2008, says the organisation.

It says half of all settlements was awarded at between 1.9 and 2.5 per cent. Some 55 per cent of pay settlements fell between 2 and 2.99 per cent, and pay freezes were almost as rare as rises at or above 4 per cent.

IDS says a number of larger retailers chose to pay increases above the level of the increase to the minimum wage, in order to maintain a gap between their lowest rates and the statutory minimum, and avoid being seen as ‘minimum wage employers’.

IDS says the outlook for 2011 is for an average 3 per cent rise, with inflation, especially the RPI, a key factor, although a 3 per cent rise is less than half the rate of retail price inflation.

Ken Mulkearn, Editor of IDS Pay Report, whose staff collect and analyse the pay settlement data for IDSPay.co.uk, said: "As we prepare to turn the corner into 2011, there are a number of competing pressures – both upward and downward – on pay. Affordability and cost pressures loom large, but inflation is likely to increase in importance as employees’ energy bills rise, rail fares rise and the increase in VAT comes into effect in January."

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