The latest pay settlement data released by XpertHR indicates a significant drop in median basic pay awards for the first three months of 2024, with the figure falling to 5.1 percent.
This marks a decline of 0.9 percent percentage points from the previous rolling quarter, reflecting the economic challenges as the UK officially enters a recession.
Despite the decrease in median pay settlements, the research also reveals that approximately 53.5 percent of pay awards in a matched sample analysis were valued lower than the previous year’s settlements.
The findings suggest a trend of organisations restraining pay increases, possibly in response to the economic downturn and financial pressures stemming from the high inflation levels experienced in 2023.
Settlements worth less than previous awards
Sheila Attwood, XpertHR senior content manager, data, and HR insights, commented on the trend, stating, “There are signs that the 6 percent headline pay award recorded during 2023 will not be matched in 2024 pay reviews. We are already beginning to see that around half of employee groups are receiving settlements worth less than their previous award, where high awards were provided to account for the rising cost of living affecting UK employees at the end of 2022 and throughout 2023.”
The decrease in median pay awards contrasts with the decline in the Consumer Prices Index (CPI), which fell from 10.1 percent in January 2023 to 4 percent in January 2024. The research anticipates that pay awards would follow the trend of decreasing inflation; however, the reality is that many pay awards are now valued lower than in the previous year.
Attwood further noted, “While the median has fallen, it is still elevated by historical standards, with pay awards having not been consistently at this level since 1991. And there are still some inflation-busting deals being made – one-fifth of reviews were worth at least 7 percent, and as inflation falls, our headline measure now sits above both RPI and CPI inflation.”
A quarter were worth 4% or less
The report also provides insights into the pay review patterns across the economy from January 2023 to January 2024. The data, based on 57 settlements representing 181,174 employees, highlights that a quarter of basic pay deals were worth 4 percent or less. The upper quartile remains at 6.6 percent, emphasising the variability in pay awards across different industries.
In terms of sectors, the public sector continues to outpace the private sector, with the public-sector median award at 7 percent, one percentage point higher than the private sector. However, uncertainties loom as the government has not yet issued the Civil Service pay remit guidance for 2024/2025, and pay review bodies are not expected to report until later in the year.
As organisations grapple with the financial repercussions of high inflation levels and elevated pay awards budgets in 2023, the report suggests that many may limit their budgets in 2024, contributing to the observed decline in median pay settlements. The first pay settlements of 2024, with a median award of 5 percent, set the tone for the year as businesses navigate economic challenges and make strategic decisions in response to the evolving financial landscape.
Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.
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