News

Slow pay growth but females catching up?

The latest CIPD survey reveals that 58% of employees have had their pay frozen this year with the larger proportion of these people being employed, not surprisingly in the public sector. Meanwhile those employees who have received a pay rise this year will have seen their pay increase by less than the cost of living, with a median rise of 3%. Of course, the increase next month in the National Minimum Wage (to £6.08 per hour for adult workers from 1 October) will see some employees in retail, catering and hotel work receiving pay rises.

At the other end of the pay spectrum Deloittes report that Executive Directors will receive pay increases this year after two years of pay restraint/freezes. Salaries for FTSE 100 Directors are forecast to rise by between 2.5% and 7.5% with a median increase of 4% and their bonuses will increase from 71% to 87% of annual salary. FTSE 250 Directors will fare slightly less well, seeing salary rises at a median of 3% and bonuses rising from 54% to 86% of annual salary.

Meanwhile the Chartered Management Institute (CMI) in conjunction with XpertHR, report that for the first time female executives are earning the same as males – however only at  junior levels. By their reckoning full equal pay for men and women at all executive levels is still 100 years away!

It is worth remembering however that in the latest Reward Management Survey published by the CIPD they report that market positioning of pay is becoming more common again, as was the case before the recession. Over half of respondents to their survey were looking to position their pay at market midpoint and they regard market rates as the most important factor in determining pay levels. Ensuring that reward is market competitive therefore is one of the key reward priorities for these organisations in 2011 and going forward.

A supporting consideration to this is the question of how often should you review your pay arrangements to ensure that they remain market competitive? We would recommend that an annual review should be carried out or at the very least once every 2 years.

If you need assistance in the market positioning of your pay levels we at CELRE Consultancy are ideally placed to help you. Do you know where you stand in pay terms compared to the market? If not, let us help you.

Economics

This year’s pay reviews are taking place against a background of mixed economic indicators. Inflation has seen a period of volatility unprecedented in recent times moving from negative territory in late 2009, to peak at 5.3% in April 2010. Having initially fallen back February 2011 saw a continuation of January’s climb to 5.5%, followed by a fall in June and July to 5.0%, but rising in August to 5.3%. The general consensus remains that RPI will fall during the remainder of this year and the forecast of 5.3% for Q4 2011 may be a little high at this point, given that RPI is forecast to fall during 2012. This is key, as most negotiators will seek to focus on the forecast RPI, rather than its current level when settling pay awards.

Pay Bargaining Stats – September 2011

Inflation

Headline inflation

Retail prices index (RPI): 5.2% (August 2011)
Next release date: 18 October 2011.

Underlying inflation

Retail prices index excluding mortgage interest payments (RPIX): 5.3% (August 2011)
Next release date: 18 October 2011.

Consumer prices

Consumer prices index (CPI): 4.5% (August 2011)
Next release date: 18 October 2011.

Inflation forecasts

Q4 2011: 5.2%; Q1 2010: 5.3%
Next release date: 21 October 2011.

Pay Settlements

Xpert HR  headline pay measure

The XpertHR measure of pay awards - the midpoint in the range of basic pay deals - stands at 2.0% in the three months to 31 August 2011, unchanged from the revised figure for the previous rolling quarter, according to the latest provisional analysis. The inter quartile range stands between nil and 3%.
Next release date: 21 October 2011.

Engineering and manufacturing (EEF)

Average settlements for three months ending 31 August 2011:  2.5%
Next release date: 21 October 2011.

Manufacturing and services (LRD)

Median settlement levels for three months ending 31 August 2011: 2.5% (manufacturing);  2.5% (services)
Next release date: 21 October 2011.