Last year saw some difficult pay settlement discussions within our member companies – a combination of a period of restricted awards (generally) gave way to some settlements which were in excess of the commonly used indices. Unions, used to a stagnant economy with limited wage growth were much more bullish in 2019, which coupled with the uncertainty about the direction of the economy as Brexit loomed made for some difficult times. Given that both employers and employees face continued uncertainty in 2020, then it could be a difficult time.
We are entering the peak period for pay talks, and it might be helpful for our members to have some context.
We would always recommend that, rather than inflation or any other index, the Consumer Price Index including Housing Costs (CPIH) is the most accurate definition of the actual cost of living in the UK. Without wishing to get into the technicalities of it, the formula used to calculate is more realistic. CPIH has never risen beyond 2.0% in 2019, and currently sits below 2. Currently RPI (which, as it is generally higher than CPI is often the Unions go to) is also below 2%, at about 1.8%. So, on that basis, any increase at 2% or over comprises a real life increase.
We gather pay settlement data from our member companies – essentially what they are paying by way if increases in the preceding time period – if you don’t currently contribute to that, then please do so.
To January, pay settlements sit around the 2.5% average. That said, National Minimum Wage increased last year by 4.9%, so naturally, if an organisation has a reasonable number of people eon the minimum wage, then the average settlement is skewed to a degree. Many other organisations are catching up after a few lean years too.
There also seems to be some enthusiasm within the TUs for 2 year deals – as an employer the benefits are clear, in that you don’t need to go through this loop again next year, but given the uncertainty in the economy, I would urge you to take a pragmatic view on the affordability of year 2 given where we are.
If you take our services, we are happy to be part of your negotiations, and work with you to get a deal with your employees. If you don’t take our employment services, we are always happy to provide data to support your negotiations.
