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Pay deals nearer to parity with inflation

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Pay settlements are edging closer to inflation levels, but only because inflation is falling, reports HR research company, XpertHR.

In the three months to the end of August 2012, the median basic pay increase in the private sector stood at 2.5%, unchanged on the figure for the three months to July, said XpertHR. With retail prices index (RPI) inflation falling to 2.9% in August, this puts pay awards at just 0.4 percentage points below the rate of inflation.

For the gap to close further, inflation will have to continue falling, as pay rises in the private sector are firmly within the 2% to 2.6% range seen over every rolling quarter for the past year and showing no signs of increase, said XpertHR.

Across the economy as a whole, pay awards are at a median 2.4% – slightly lower than the private sector figure, due to the continued prevalence of pay freezes in the public sector.

It also found that across the economy the median basic pay award is 2.5% – 0.5 percentage points above the 2% median recorded in the year ending 31 August 2011.

XpertHR pay and benefits editor Sheila Attwood said: "The median pay settlement has remained remarkably stable during a period of economic uncertainty. Analysis of the range of pay deals reveals that pay freezes are still evident, and with inflation falling the number of pay deals worth more than inflation is rising. But at present we see no evidence of a shift in the median pay settlement over the coming months."

For this analysis, XpertHR recorded details of 143 pay awards effective in the three months to the end of August 2012.

XpertHR collects details of pay settlements for around 1,600 employee groups each year.