Wage freezes are not the only story for pay

Wage freezes are not the only story for pay

There are good pay deals still being done, including in the private sector, according to data from the Labour Research Department (LRD) Payline database.

Pay freezes are not the only way employers have responded to the economic downturn.

In fact, according to Payline, only around 23% of wage settlements since January 2009 have been pay freezes.

This means that the greater majority of wage settlements, including in the private sector, have been positive. In only a tiny handful of cases have there been actual pay cuts.

However, LRD’s information shows the level of pay increases has dropped since 2008, to an overall median of 2.5% from January to June this year, while the range of pay settlements has widened, with deals in the private sector ranging from 0% to 6% or even more.

LRD’s figures are also revealing another apparent trend in pay for 2009 in the growing difference between long-term and short-term negotiated pay deals. The median since January 2009 for long-term deals is 3.2% compared to the median for new deals, which is 2%.

Settlements that are negotiated for one year (or sometimes less) with unions have also been disproportionately affected by pay freezes. Currently around 35-40% of these new deals are running at 0%.

This is in stark contrast to long-term and staged deals, often – but not always – built on a formula linked to one or other of the official measures of inflation. These deals are in almost all cases still delivering pay rises, mostly in the range 0.5%-5%. And, while in some very rare cases employers have reneged on these deals, for the most part pay promises made before the downturn have been honoured.

“It is likely that employers that sign long-term deals with their unions favour stability and good industrial relations, and know that over time the pay picture will probably even out under these deals,” said Lewis Emery, LRD’s pay and conditions researcher.

“Freezing pay is a short-term solution, and is not sustainable in the long term. Many employers even in a downturn see the benefits of a more predictable situation where they can be sure of rewarding their staff consistently.”

The three-monthly median pay increase up to and including June 2009 was 2.3% for all deals. This is a drop from the three-month figure to May, which was 2.5%.