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01 May 2009

Pay deals begin to slide

Pay increase levels have dropped significantly and are continuing to decline. Negotiated pay settlements recorded so far on Labour Research Department's (LRD) Payline database for April 2009 show a marked slump from previous levels. The median for April settlements to date is just 1.5%, and if long-term deals are excluded, it is zero.

The figure contrasts with monthly all-deals Payline figures of 4.2% in December, 3.2% in January, 2.5% in February and 2.1% in March, showing a gradual decline from the beginning of the year. The more stable three-monthly median figure showed exactly 4% in the three months to December and this had only fallen to 3% in the three months to March, reflecting the large number of settlements in January. But the median for the three months to April, weighted towards the larger number of deals done in April, looks likely to come in at around 2% (final April figures are not yet available).

In a new development, the month of April also includes a small number of pay cuts, for example at Akcros Chemicals, the PVC-u window manufacturer Spectus Systems and another small specialist chemical engineering company. The 0% figure for new deals suggests that, on limited evidence so far, wage freezes and cuts may be outnumbering newly negotiated deals for the first time.

A large number of deals remain positive. The best new pay deal registered on Payline to date for April is 6.25% for bus drivers at Stagecoach Peterborough, followed by 5% for film performers and extras (Film Artistes Association). Long-term deals offered 5% to Community Housing Group, 4.32% to Western Power Distribution and a pay pot of 5% to Barclays bank staff. There were some new long-term deals: Bristol Water, for example, showed a new approach to RPI-linked settlements. Employees there will receive 1.5% this year, followed by an inflation-linked figure in April 2010 of 1.5% if RPI is zero or negative, or RPI plus 1.5% if it is positive, capped at 3.5%.

Pay deferrals or freezes occurred, among others, at Jersey Evening Post (till September), First Edinburgh, Newcastle Building Society, MacDermid plc (with voluntary temporary pay reduction/hours reduction), Panasonic Manufacturing UK, Perkins Engines, Ericsson, and the NSPCC (imposed by management). Employers backed out of pre-agreed pay deals at Gallions Housing Association and a specialist chemical manufacturer that asked not to be named.

LRD Payline's research shows it is not only pay that employers are trying to push downwards. Benefits and other conditions are also being threatened. LRD's research reveals individual employers cutting pension contributions (for example at Aon, Aviva and Hewlett Packard/EDS), refreshments and meal subsidies, and other allowances such as travel, sick pay, health insurance, long service awards and shift arrangements.

Lewis Emery, LRD's pay and conditions researcher, said: "We are seeing the impact of recession really beginning to hit home on pay settlements, particularly in manufacturing, although some of the deals we have recorded show that significant pay increases are still possible.

"It is not certain whether April's figures represent a long-term trend. But it is worrying that employers are not only negotiating with unions over pay restraint, but also attempting to erode basic conditions, such as pensions, that will affect workers in the long term. Unions are likely to resist this strongly."

Brendan Barber, general secretary of the TUC, said of the pay figures: "As LRD's research shows, the UK's pay picture is a very mixed one right now. Clearly there have been some instances where unions have agreed to put pay increases on hold or take cuts in wages to save jobs. But many companies are still profitable and can afford decent pay rises.

"The danger is that with inflation continuing to fall, employers may be tempted to trigger a process of widespread pay freezes or even take the opportunity to cut wages. This would be a very bad move and would undoubtedly prompt families to cut back on their spending " the last thing the UK's struggling economy needs right now."

He added: "Unions will be on the lookout for employers trying to use the recession as an excuse to slash their wages bill.

LRD's analysis compares with recent Hay Group findings for the UK, that show pay settlements at one of the lowest levels in Europe for 2009, and both pensions and training under threat, with other terms and conditions next in line.

For further information about Payline or Workplace Report, contact: Lewis Emery or Rebecca Johnson (Workplace Report editor).

Notes for Editors

  • This story appeared first in the April issue of Workplace Report published by LRD.
  • Workplace Report is LRD's monthly publication for union reps and negotiators.
  • Labour Research Department is an independent organisation founded in 1912 to produce research on behalf of trade unions and the labour movement. More than 1,800 trade union organisations, including 55 national unions, are affiliated to it, representing more than 99% of TUC membership.
  • Payline is LRD's database of negotiated agreements reported to LRD by unions. It includes around 2,000 agreements with information on pay, terms and conditions and other aspects of the employment contract. A full pay round survey is conducted bi-annually in April and October.
  • Pay settlements are negotiated rises on basic pay, and exclude bonus, increment, overtime and other allowances.


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