Subdued pay awards reveal impact of pandemic

In the three months to the end of May 2020 the median basic pay award is worth 2.2%, according to the latest findings from pay analysts XpertHR.

As the UK starts to emerge from the coronavirus pandemic, our headline pay award remains subdued as the impact on the economy hits organisations’ ability to reward their employees.

The research shows many employers cancelling or deferring 2020 pay awards, while others have had to introduce pay cuts and the fear of redundancies lingers. Among the pay deals recorded by XpertHR for the current three-month period, 15.2% resulted in a pay freeze.

Latest pay award findings

Based on a sample of 243 basic pay awards effective between 1 March and 31 May 2020, we find the following:

• The median basic pay award is worth 2.2%, the same level as in the previous rolling quarter.
• Almost one in four (23.9%) basic pay settlements is worth 2%, making it the most common pay award in our three-month sample, while deals worth 2.5% and 3% account for 11.9% and 9.9% of basic pay awards respectively.
• The middle half of pay deals are worth between 2% (lower quartile) and 3% (upper quartile), unchanged from the previous rolling quarter.
• In a matched sample analysis, 44.6% of the pay awards made are lower than the same employee group received in the previous year. More than one in four (28%) are at the same level, while a similar proportion (27.4%) are higher.
• Among the total sample of pay settlements recorded, 15.2% are pay freezes, almost double the number recorded in the three months to the end of April 2020 (8.5%).

In the three months to the end of May 2020, pay awards in the manufacturing-and-production sector are at a median 2% and fall behind pay deals in the services sector, where the median is 2.3%.

Based on a 12-month measure, pay awards in the private sector – where the median is 2.3% – continue to be outstripped by those in the public sector, where the median is 2.5%.

XpertHR pay and benefits editor Sheila Attwood said:

“Across the private sector, alongside the many organisations delaying a decision on their annual pay review, the number reverting to a pay freeze is increasing. With the potential for redundancies looming, frozen or reduced pay is likely to be used as a way to minimise the number of job losses.”