The latest pay settlement data from Incomes Data Services shows that the median pay award among private firms in the three months to April was 3 per cent, compared to zero for public employers.
It is the first time in decades that public sector pay has been frozen on average, with the effect of spending cuts showing in April’s pay round for most organisations. All but one of the public employers in the analysis – which includes 88 organisations – had frozen pay.
While the increased private sector figure could be seen as a sign of improved economic fortunes, rising inflation may also be responsible for increased pay demands, with the Retail Prices Index (RPI) standing at 5.2 per cent and the Consumer Prices Index (CPI) at 4.5 per cent. The rising cost of living means that even the more generous settlements in the survey represent a cut in real terms.
Ken Mulkearn, editor of IDS Pay Report, said:”While our headline figures show that pay settlements remain stable, the whole-economy median obscures a wider reality and clear differences between the public and private sectors. The latest figures show that private sector pay awards are where we thought they would be this time of the year, reflecting a degree of recovery in profitability and higher leve of inflation”.
With unemployment standing at a high level and a high degree of economic uncertainty, companies might be tempted to sit on spare cash at this time rather than spending it on investment or higher pay, he added.