Private sector pay awards show signs of recovery


Private sector pay awards show signs of recovery

Pay settlements in the private sector remain broadly stable, centred on 2%, according to the latest analysis from

But the proportion of higher-level deals has increased slightly, mainly as a result of the economic outlook, with new long-term deals in areas like the utilities driving this picture.

Public sector pay restraint

In stark contrast with the picture for the private sector, the proportion of pay freezes in the public sector is “rising fast”, with exactly half of the 30 public sector pay settlements monitored by IDS in the three months to the end of June 2010 resulting in a pay freeze. Among the newly-recorded pay freezes in the public sector is the zero award for 1.4 million local government employees effective from April 2010.

IDS says: “The freeze was decided upon by local government employers before the government announcement that employees earning below £21,000 would receive protection from pay freezes, and therefore pay has been frozen for all local government employees regardless of salary level.”

So far in 2010, almost a half of public sector workers have had their pay frozen, and this is likely to increase, says IDS. “This is greater than the proportion of private sector workers that had their pay frozen in 2009, which was below a third.”


Private sector - signs of upturn

Although significant numbers of private sector employers froze pay in 2009, two-thirds of pay reviews resulted in increases, according to the IDS analysis. The strongest picture on pay continues to be represented by the utilities sector.

IDS says: “While it may be argued that the energy sector is unique, in that it is controlled by a relatively small number of profitable firms, many major employers in sectors such as retail have also managed to pay year-on-year increases. This has also been the case in much of the finance sector, where many major financial institutions paid basic increases in both 2009 and 2010.”

In those industries that were particularly affected by the recession, such as the motor industry, there have also been recent “positive movements on pay”.

IDS says: “Although major employers are tending to keep a close eye on paybill costs, meaning basic pay mostly remains frozen, many car manufacturers are making non-consolidated payments instead, with employees beginning to see some financial reward for savings they delivered in 2009. Interestingly, car components manufacturers, which are still facing pressure from car makers to keep costs down, are returning to paying basic pay increases in 2010. This is perhaps an indication that for now at least, the outlook for the auto industry is better than it has been for some time.”

Multi-year settlements begin to re-emerge?

A feature of the recent recession was the dramatic drop in the number of newly-agreed multi-year pay deals.

IDS says “Economic uncertainty coupled with historically low inflation meant that in those sectors where multi-year deals were the norm, such as the motor industry, employers and workers alike were reluctant to be tied into multi-year agreements. Similarly, tighter public-sector pay restraint meant that long-term deals here were also discouraged.”

However, long-term deals are being agreed once more, though whether or not their numbers rise will depend on a number of factors, not least being the economic outlook.

IDS says: “Some of these are in sectors that have not been so adversely affected by the recession, such as the utilities sector, where 11 new long-term deals have been reached so far this year. Here employers are aiming to establish their labour costs in advance, putting annual negotiations in abeyance over a period in which skills shortages could develop.”

Summary of key settlement data

For the three months to the end of June 2010, based on 180 settlements covering 3.6 million employees in total, the key statistics are these:

  • Whole economy median: 2.0%

  • Whole economy average: 1.8%

  • Whole economy inter-quartile range: 0% to 2.6%

  • Manufacturing and production median: 2%

  • Private services median: 2%

A final word

“There are renewed signs of life on the remuneration front in the private sector. Long-term deals are making something of a comeback, and pay reviews in hard-hit sectors like autos are resulting in money in employees’ pockets once more. But the contrast with the public sector is ever-sharpening, with the number of staff covered by pay freezes rising, alongside widespread job cuts." - Ken Mulkearn, Editor of IDS Pay Report.

Want to know more? is an online source of all the remuneration data collected by IDS, on pay settlements, pay levels and executive compensation. Visit

IDS Pay Report, published fortnightly, is the “UK's leading source of research and analysis on pay and benefits across the economy”.

Incomes Data Services is the “leading UK information and research service on employment issues, providing a range of publications for employers, trade unions, government departments and other agencies”. For more details visit