Low inflation and economic uncertainty continued to depress pay settlements in the first half of 2016. The median level of pay settlements for Prospect bargaining units so far this year is 2.00% and the mean average is 1.98%.
Some bargaining units have achieved higher than average settlements including the BT Reward Framework, Babcock Rosyth and Scottish and Southern Energy at 2.5%, 2.5% and 2.4% respectively.
All these pay deals were multi-year settlements benefiting from the certainty provided by long-term pay arrangements.
However, most multi-year settlements this year have been lower than single year pay deals because they are index-linked to low inflation.
Prospect pay settlements – January to June 2016
|
|
Median |
Mean |
|
Pay deals |
29 |
29 |
|
Single year |
2.00% |
2.23% |
|
Multi-year |
1.30% |
1.75% |
|
All |
2.00% |
1.98% |
The National Living Wage, which came into effect from 1 April 2016, does not appear to have had a major impact on the latest earnings figures.
Total pay (average earnings including bonuses) rose by 2.0% and regular pay (excluding bonuses) rose by 2.3%.
The wholesale and retail sector, where the rise in total pay was 1.3% and regular pay was 2.4%, is most likely to benefit from an increase in the National Minimum Wage.
Earnings growth in retail has been strong in recent months, possibly because employers have increased pay to take account of the NLW rate. This may explain why earnings growth overall has not been affected by the introduction of the new minimum rate.
The 4.5% pay increase at National Trust is a good example of how employers have increased pay to take account of the new rate. The settlement with Prospect includes all staff at the National Trust, not just those over the age of 25 years, which is the statutory requirement.
Inflation
The current rates for CPI and RPI inflation are 0.3% and 1.4% respectively. Inflation is expected to rise slowly this year, but it is too early to predict how Brexit will affect the future path of inflation.
The weakness of Sterling and rising oil prices were expected to affect prices and these trends are likely to be reinforced by the vote to leave the European Union.
However continued slow economic growth and weak trends in retail prices will continue to have a downward effect on inflation. As a result, most forecasts expect the Bank of England interest rates to remain unchanged in 2016.
For more information see the latest edition of Pay Report (member login required) https://library.prospect.org.uk//download/2016/01292