UK Private-Sector Pay Deals Stall Despite Record Minimum Wage Boost
UK Pay Settlements Moderate Amid Boost from Minimum Wage Hike
The recent news of moderate UK pay settlements in the three months to April has provided a respite for businesses and the government alike. According to industry data released on Monday, typical annual pay settlements offered by British companies in this period edged downwards slightly to 3.4%, down from 3.5% in the previous quarter. Despite the slowdown, however, the proportion of employers offering pay settlements exceeding 6% jumped to 11%, reflecting the significant impact of the minimum wage hike.
The 6.7% increase in the minimum wage to Ā£12.21 ($16.51) per hour that took effect in April has had a substantial boost on lower-paid workers, leading some companies to be more generous with their pay offers. However, this surge has also coincided with higher national insurance contributions for employers, which may have made some businesses more hesitant to offer pay settlements.
Breaking Down the Numbers
Industry data provider Incomes Data Research (IDR) reported that the median private-sector wage deal was 3.4% in the three months to April, down from 3.5% in March. However, this moderation is primarily due to the proportion of employers offering pay settlements exceeding 6%, which rose to 11%. The percentage of companies offering pay settlements below 2% dropped by 10 points, from 40 to 30.
The statistics revealed a mixed picture across different sectors:
- Private Sector: The median pay deal fell slightly to 3.4%, reflecting the cautious approach taken by some employers in response to increased national insurance contributions.
- Public Sector: Very few public-sector employers were included in IDR’s sample of 129 pay deals, covering approximately 1.3 million workers, mostly at large companies.
- Not-for-Profit Employers: A 2.7% rise in pay levels in this sector helped cushion the slowdown observed in the private sector.
Forecasting Pay Growth and Inflation
Britain’s Office for National Statistics (ONS) is scheduled to publish wage data for the three months to April on Tuesday, providing a clearer picture of pay settlements across various sectors. Preliminary Reuters polling data released earlier revealed that economists expect average earnings growth, excluding bonuses, to slow down to 5.4% from 5.6%. This projection aligns with forecasts by the Bank of England (BoE) which indicate that pay growth needs to moderate before returning inflation within its 2% target.
The forecast may also be influenced by trends observed since January and February where UK jobs market showed signs of slowing compared to previous periods such as those at start of November and even December.
