The first analysis of pay settlements effective in 2012 reveals a marked increase in the level of awards made, according to pay specialists XpertHR.
Pay rises effective in January 2012 – exclusively in the private sector due to a lack of public sector bargaining at this time of year – are worth a median 2.8%. This is the highest level seen since December 2008 (when the private sector median stood at 3.7%).

This is well above the 2% to 2.5% median increase seen through 2011 in the private sector, and above the 2.5% median recorded in the three months to the end of December 2011.

Pay freezes continue to feature in our analysis, with our sample including six settlements where pay has been frozen. However, almost half (48.8%) of January 2012 pay deals are worth 3% or more, and 3% is the most common pay increase recorded.

Manufacturing pay awards continue to outstrip those in the services sector, something that we have seen since April 2010. Among the pay awards effective in January 2012, the median pay increase in the manufacturing sector is 3%, compared with 2.5% in private sector services.

The pattern of higher pay awards in the first few months of the year was something we saw in 2011 – the level of pay increases fell in April 2011 when the public sector pay freezes were added to the calculations and pay awards in the service sector were low. We can again expect a flurry of public sector pay awards worth nil to be added to the data in April, but remain hopeful that private sector pay awards will maintain their upward trend.

The increase in pay awards is set against a marked fall in retail prices index (RPI) inflation – to 4.8% in December 2011. If the pace of decline in inflation continues, there is a real opportunity for employers to make up for years of low pay rises with an increase this year that is worth more than inflation.

Commenting on the data, XpertHR Pay and Benefits editor Sheila Attwood said:
“The data collected to date suggests that pay bargaining in 2012 has got off to a good start and that, for many private sector workers, pay rises higher than the levels seen in 2011 are a real prospect.

“Over the past few months we have started to see evidence of a shift to higher pay awards than were made the year before. We now find that the majority of pay awards are at a higher or the same level as paid to the same group of employees the year before, with only a handful making lower awards.”