Workplace Report October 2008


Inflation hits pay settlements as global downturn looms

Gordon Brown may be determined to keep the lid on pay inflation in the public sector – to the growing discontent of employees and unions – but LRD’s annual Payline survey covering around 6.3 million workers shows that this year’s rise in the cost of living has pushed private sector pay settlements up while also encouraging unions to seek wider-ranging deals to compensate their members.

In pay terms, 2007-8 can be characterised as one rule for the private sector, another for the public. In a year when the government aggressively capped public sector pay, negotiators in the private sector have achieved almost 45% more than public sector deals: a contrast of 4% at the midpoint against only 2.75%. Furthermore, the top quartile of workers in the private sector this year exceeded 6%.

Labour Research Department’s annual survey of pay settlements, based on our Payline database, shows that negotiators have responded to the rising cost of living – where they could – not only with a higher basic pay settlement level, but by pursuing wider deals in terms and conditions including pay arrangements (incentives, bonuses, progression, premia), working time adjustments and time off for working parents. The 2007-8 pay round also reveals a wider trend of unions both in the civil service and in parts of the private sector bargaining to overcome the effects of fragmentation by pushing for parity across their industry or group or seeking other “fairness” arrangements including underpinning payments and pay harmonisation to get better deals for their members. As in previous years, those with long-term inflation-linked pay deals in general fared best.

Mid-point pay rises by type of deal

Existing long-term deal with inflation link (13%) 4.5%

New long-term deal (10%) 4.1%

Existing long-term deal with no inflation link (14%) 3.5%

One-year or short-term staged deal (62%) 3.5%

Base 765 agreements, 656 known pay increases

The impact of inflation

In 2007-8, Retail Price Index (RPI) inflation, on the rise since 2006, has been lodged firmly in the 4%-plus range, compared with an average of 3% or less during each of the preceding seven years. It has been caught up and overtaken by the RPI excluding mortgage interest rates (RPIX) – now over 5%. Even the once-tame Consumer Prices Index (CPI), which remained below the 2% mark until 2005, has been running this year at an average of 3.3%, climbing to 4.7% in August and 5.2% in September.

Inflation forecasts are influential. Negotiators’ expectations about the cost of living are an important factor when it comes to pay bargaining. At the start of 2008, forecasts for fourth-quarter inflation averaged just 2.6% (RPI), 2.9 (RPIX) and 2.2% (CPI) (Forecasts for the UK Economy, compiled by HM Treasury). But during the spring and early summer they rose spectacularly, with latest forecasts averaging 4.8% (RPI), 5.0% (RPIX) and 4.4% (CPI) for the fourth quarter of 2008.

Despite inflationary pressure and private sector trends, average earnings overall have remained relatively subdued, with the whole-economy figure ending the 2007-08 pay round at 3.8%, reflecting the dampening impact of public sector pay. But a closer look at pay settlement levels (as measured by the mid-point or median on LRD’s Payline database) reveals a marked response to rising inflation. Mid-point levels of between 3 and 3.3% going back as far as 1999 gave way in the 2006-07 pay round to 3.6%, and Payline shows that in the latest pay round that jumped to 3.9% (see below).

Pay bargaining may seem a less immediate concern to many negotiators at presentthan job security. However, before the recent economic turmoil set in, the 2007-08 pay round saw only a modest rise in UK unemployment, from 1.6m to 1.7m in the year to May-July 2008 (across the 16-59/64 age range). While vacancies fell from 662,800 to 599,400 (over the year to August) the Jobseekers’ Allowance “claimant count” went from 848,600 to 904,900 (redundancies rose from 120,000 to 138,000 in the year to May-July 2008). This picture has clearly worsened considerably since the pay round ended in July: the Hay Group and the Centre for Economic and Business Research predicted a 1.9% workforce loss from the finance sector – a total of 110,000 jobs. The CBI, the employers’ organisation, has warned of implications for the “real economy” while the British Chambers of Commerce say the UK is already in recession.

Times may be getting tough, but there were few pay freezes during the last pay round. David Yeandle, head of employment policy at EEF, the manufacturing employers’ organisation, predicted earlier this year that higher settlements would be balanced by more pay freezes and deferred pay rises. The TUC believes that this is unlikely to be the case and during the 2007-08 pay round LRD recorded just half-a-dozen such deals.

TUC senior policy officer, Richard Exell, told Workplace Report: “During the last recession in the early 90s, pay increases tended to be a little ahead of inflation and grew even further as the economy recovered. Earnings did suffer, but this was due to a loss of bonuses and overtime, not because of below inflation pay increases.” However, workers’ chances of a fair pay increase during the recession depended heavily on someone being able to make a robust case on their behalf, with union members earning around one sixth more than non-union members: “This is a good time to join a union and get your workplace organised”, Excell added.

Percentage increases on lowest basic rates

By number of agreements:

bottom 10% bottom 25% median 50% top 25% top 10% Average (mean) No. of settlements
All agreements 2.50 3.00 3.90 4.35 5.01 3.84 689
Private sector 2.55 3.25 4.00 4.40 5.10 3.96 596
Public sector 2.00 2.45 3.00 3.50 4.39 3.05 93
Non-manual only 2.00 2.50 3.30 4.15 5.10 3.60 167
Manual only 2.70 3.33 4.00 4.40 5.00 3.97 305
Single status 2.50 3.10 3.90 4.35 5.00 3.84 217

By number of workers covered:

bottom 10% bottom 25% median 50% top 25% top 10% Average (mean) No. of workers
All agreements 2.50 2.60 3.20 4.02 6.00 3.59 5,793,805
Private sector 2.60 3.20 4.00 6.00 6.00 4.29 2,662,134
Public sector 2.25 2.50 2.75 2.75 3.60 2.99 3,131,671
Non-manual only 2.20 2.50 2.50 3.49 3.49 2.81 1,576,243
Manual only 3.20 3.60 4.40 6.00 6.00 4.64 1,927,269
Single status 2.60 2.75 2.75 3.60 4.30 3.24 2,290,293

Public versus private

While economy-wide figures stand at 3.9%, in the private sector the mid-point was 4%, with half of all settlements (the “inter-quartile range”) worth between 3.25% and 4.35%. The average increase was 3.89%. Payline also calculates the mid-point based on the number of workers, not just number of agreements. Weighted in this way the economy-wide figure was 3%. But the weighted figure for the private sector was still 4%. However, the upper quartile (top 25%) of private sector workers were covered by deals worth 6% or more on the lowest basic rate though this reflected only 4% of agreements. The picture was very different in the public sector, with a mid-point of exactly 3% but a weighted mid-point of just 2.75%. The huge local government services Green Book agreement had not been settled at the time that this report was compiled and is not included, but the NHS Agenda for Change pay rise covering 1.2 million workers (2.75%) is clearly a big influence on the overall results.

Most of the public sector agreements in the survey are grouped in three industries: health, education and public administration. While the Agenda for Change rise dominates the weighted trend in the wider health sector, other settlements grouped in the same sector (eg charities) lifted the mid-point to 3%. In education the weighted figure (2.5%) was again lower than the un-weighted figure (3%). In public administration a mid-point of 2.5% (weighted and unweighted) reflects the government’s curb on pay settlements.

There was little to choose between the mid-point results for manual-worker agreements (4%) and “single status”-type agreements covering both manual and non-manual workers (3.9%). The mid-point for agreements covering only non-manual workers was lower at 3.25% but this figure is strongly influenced by public sector agreements (accounting for over a third of the non-manual only group).


Manufacturing accounted for 34% of agreements but only 10% of workers . Alongside 200-plus company agreements there were 19 industry-wide agreements (concentrated in “other manufacturing” and – with agriculture – accounting for 80% of workers covered) and two public sector agreements (Remploy and Caledonian MacBrayne Workshops). Pay midpoints were close to the central trend in chemicals, minerals and metals (3.9%, 3.6% weighted) and engineering and metal products (3.65%, 4% weighted) but lower in other manufacturing (midpoint 3.54%, 3.54% weighted). A third were long term.

In terms of the effect of long-term deals, BOC Industrial & Special Products (ISP Manual) went into the second year of its pay deal with 4.1% (RPI plus 0.3%) although Kodak paid 2% in the final stage of its three-year deal. The vehicle building industry agreement (VBRA) paid 3% but at company level Jaguar paid 4.4% in the second stage of its three-year deal (RPI + 0.5%). Zetex Semiconductors backdated 3.8% to 1st August 2007 but paid a further 3.2% in February.

Working-time related issues cropped up in around one in five agreements, including joint discussions on shorter hours in the leather producing industry and on the subject of sick pay and the extension of a compressed hours pilot at Thales Optronics (4.2%). There was extra leave at TRW automotives (2.7% plus one extra day’s holiday and £5.00 added to the attendance bonus) and at Meggitt Aircraft Braking Systems (4.5% plus 2 extra half-day Fridays as holiday). Bombardier Derby (3.25%) will allow an additional day’s leave to be broken down into 2-hour blocks. The 4.25% rise at International Paint applied also to shift allowances, while at ExxonMobil Chemicals (Fawley) the 5.17% rise was almost matched by a 5% increase to shift differentials (now worth £7,892).

Pay systems and structures were affected in some way by one in five agreements: many of these have been covered already in issue 58 of Workplace Report. Examples of performance-related pay include BAE systems and GE Healthcare Biosciences. Pay elements and allowances were addressed in one in seven agreements, for example the £400 one-off bonus accompanying the 3.5% rise at PPG Industries.

To offset any perceived problem of unfairness in higher-paying plants, no employee covered by the corrugated packaging industry agreement was to have an increase on their local basic rates of less than 3.5% of local rates or 3.89% of national “book” rates (whichever was the higher). And at Howden Kitchens there was extra cash for employees taking part in the “flex up/flex down” shift flexibility system.

Long term pay deals

A large minority of all agreements on LRD’s Payline database take a long-term approach to pay, usually with staged rises implemented over a period of two years or more (sometimes a shorter period e.g. 20 or 21 months). As Workplace Report has noted in the past, these deals often pay a “premium” at the outset while inflation-linked clauses can produce higher payouts later on. Among 765 settlements in this year’s survey, 38% were long-term deals of which 27% (78) of the total were new this year. Existing long-term agreements with an inflation link once again topped the pay round with a mid-point of 4.5%. This is a full 1% above one-year or short-term staged deals and those with no inflation link. In between came new long-term deals (mid-point 4.1%). In the 2006-07 pay round the proportion of existing long term deals with an inflation link was slightly smaller but the pattern of settlements was similar. An explicit link to some measure of inflation (usually the RPI) is not the only protective aspect of the best of these deals: negotiators on either side may prefer the certainty of a known pay rise in year two or three, but some sort of re-opener is likely to be needed to prevent an unfavourable outcome. For example, the new three-year Thermal Insulation Contractors Association agreement provides for pay rises of 6% in years two and three (following a 7% rise last January) but should inflation statistics for 2009 and 2010 be higher than 6%, consideration is to be given to increasing the 2009 and 2010 award.

A new three-year agreement at Yorkshire Regional Newspapers (4.59% to 5.66% for qualified journalists and 4.55% to 8.16% for unqualified journalists) provides for increases of RPI plus 0.25% in the second and third years, but if the RPI is outside of a predetermined band, negotiations will reopen.

A two-year deal at distribution company 3663 provided a 3.25% increase on all basic rates of pay and fixed allowances in the first year, with a further adjustment to ensure the 3.25% is applied to all bonus elements of pay. A similar clause will apply again in 2009, but negotiations can reopen should there be significant changes in the economic situation that would warrant further discussions.

Deals linked to inflation

Where agreements include an inflation link this is almost invariably a link to the RPI. Nearly a quarter of all settlements (24%) make some reference to the RPI, including as many as two-thirds of the new long-term deals for the 2007-08 pay round (despite inflation). Only four agreements refer to RPIX and three to CPI (based on a sample of 765). A different approach is taken at Foreland Shipping, where the 2006 five-year pay deal provides for an annual pay review governed by the Average Earnings Index (headline rate). The rate published in December is used for pay rises implemented on 1 January each year and this year yielded a pay rise of 4%.

“Fairness” deals help address low pay and inequality

Fairness in employment is addressed in various ways in 90 agreements (12%). We have included a diverse range of topics under this theme. These include underpinning minimum pay rises, where a minimum amount (typically a cash sum) is applied to pay scales that would otherwise go up by less as a result of the percentage agreed. There were 27 examples of this approach (30% among this group of agreements, 3.5% of the survey as a whole). We separately identified a number of agreements relating explicitly to the National Minimum Wage (13, 14%), setting new “minimum” pay rates for workers covered by the agreement (12, 13%), or addressing low pay in some other way (10, 11%). Other fairness themes concerned harmonisation, agency workers, the position of trainees, and age-related pay. Less positive, potentially, were agreements featuring ‘two-tier’ pay arrangements of one kind or another.

Other negotiated elements

Pay bargaining often has more to it than a simple haggle over the size of the cost-of-living rise. Examples are provide in the industry sector boxes but the commonest issues covered by pay deals in 2007-08 included:

• Pay elements

• Pay systems

• Working time and leave

• Equality and family friendly arrangements

• Issues of fairness

• Other benefits and entitlements.

Pay systems and structures were either affected by or relevant to the terms of the settlement in 177 agreements (23%). The two big themes under this heading were performance-related pay in 35% of this group of settlements, 8% of all agreements (62 agreements) and bonuses in 29% (or 7% of the survey as a whole, 52 agreements). Other features identified under this heading included pay progression (12%), pay levels for specific staff groups (11%), other aspects of the pay structure (9%) and the use of market data to reference pay levels (8%, 15 agreements but including some big employers like the banks). Other bargaining topics included here are productivity, incentives, profit-related pay, individual pay, probationary, promotion and “acting up” arrangements, commission schemes, skills pay and TUPE.

Pay elements and allowances featured in 149 (19%) agreements. Allowances generally were adjusted, introduced or otherwise referred to in 36 cases (24% of the 149 agreements). London, regional or location pay were referred to or adjusted in 29 cases (19%). Travel-related provisions crop up in 28 cases (19%). Twenty-one of those employers (14%) included a lump sum payment in their settlement. Other common elements referred to (but not necessarily improved) were sick pay or sickness absence (20, 13%), attendance bonus (19, 13%), First aid (11, 7%) and a range of other issues (subsistence, meals, recruitment and retention, safety pay, training payments, “hot-spot” pay (extra money to address recruitment or retention) and supplements.

Working time and leave issues cropped up in 131 (17%) agreements. Again, while these are not necessarily improvements, (some cases signifying simply that premia have been increased in line with the pay rise), but there is clearly some movement in this area with some employers (for example) adjusting their holiday provisions in response to increasing statutory entitlement under the Working Time Regulations. Most frequently, settlements affected holidays or holiday pay (45 out of 131, or 34%); shifts, nights or unsocial hours (24%); hours (15%); overtime (15%); other premia (11%); standby and callout (10%) and a range of other topics including annual hours, bereavement leave, breaks, flexitime, rostering and weekend work.

Equality, work-life balance and family friendly policies figured in 29 (4%) agreements. The main developments here are improvements in paternity and maternity leave entitlement (26 agreements reflect one or the other). But adoption and parental leave entitlement, flexible working, equal pay (eg audits), family friendly policies, home working arrangements and work-life balance get a mention in a handful of agreements.

Other benefits, entitlements and procedures cropped up in 30 cases (4%). Pension-related developments – not always positive – figured in at least a dozen agreements, ranging from changed contribution levels to adjustments in pensionable pay. Other subjects grouped here include health care schemes, long service awards, death benefits, salary sacrifice schemes and flexible benefits, staff discount, an employee help line, drug and alcohol policies, share schemes, redundancy and other procedures.

Transport, communication, distribution and hospitality

Together these sectors accounted for 36% of agreements and 20% of workers covered in over 200 company agreements, 5 industry agreements (accounting for 10% of workers covered) and 18 public sector bodies (Royal Mail, London Underground, air traffic controllers and some staff in the bus sector). Transport and communications came in above the midpoint (4.1%, 4.99% weighted) but retail, wholesale, hotels and catering fared less well in this inflationary climate (3.2%, 3.2% weighted), reflecting the 2007 increase in the National Minimum Wage. Almost half of these deals were long term.

Some of the big deals in the sector have already been reported, including the dispute-ending 6.9% pay rise over 18 months at Royal Mail (Issue 51) and the Tesco pay deal (issue 60). Working time and leave issues, together with pay elements and allowances, played a big part in settlements in these sectors, each reflected in around a quarter of deals. Examples include a working party on shorter hours for on-train catering staff at Scotrail , and overtime rates and leave arrangements at Northlink Ferries.

Despite fragmented depot-level agreements at Tesco Distribution, separate deals provided for common improvements affecting a range of working time issues (along with a minimum increase of 4.14% on all pay rates) eg premium payments to be shown as a percentage to ensure their value is maintained (night shift 33%, weekend 50%), lump sum payments for providing stand-by cover on Christmas Day, Boxing Day, New Year’s Eve and New Year’s Day, and increased annual holiday entitlement. Underpinning rises, like the 4% or £700 (whichever is the greater) at Carillion Rail helped ensure fairness. At rail company Southern (4.35%) paternity leave increased to one week’s full pay while maternity leave increased to 15 weeks full pay (18 weeks from April 2009).

Health, education and public administration

These sectors, which account for 10% of agreements, affect a massive 49% of workers covered by the survey, even without the Local Government Services agreement (still unresolved as Workplace Report went to press). Public sector agreements dominate although there were eight private company agreements (contractors like Sita, charities and other organisations). The public administration midpoint was 2.5% (weighted and un-weighted), education 3.0% (2.5% weighted) and health 3.0% (2.75% weighted). About a third of these agreements were long-term.

Pay systems and structures are a major concern with the civil service unions campaigning to overcome fragmentation and the government’s 2% pay policy. The biggest, PCS, was balloting over industrial action on pay as Workplace Report went to press. In the further education sector UCU has accepted a pay offer worth 3.2%. Their two-stage pay deal for 2007-08 provided for staged rises totalling 3% although not all colleges apply this. Higher education staff have a relatively new national agreement and pay deal, in its fourth stage (out of five) during the 2007-08 pay round with an increase delivering the greater of 3% or £420. The final stage, due this month, was for 2.5% or the RPI as at September 2008.

Details of the NHS Agenda for Change agreement (£400 or 2.5%) as well as the concerns some unions had about it have already been reported by Workplace Report (issue 51). Also counted in the health sector was the youth and community workers national agreement (2.475% on all spinal column points plus continuing moves to align maternity and adoption provisions to those of the NJC for local government services).

Enhancing low pay

While percentage pay rises are the norm, flat rate deals have historically been used to level up pay rates. Bridge Aluminium provided a rare example of this approach at the very start of the 2007-08 pay round with a flat rate increase of £9.00 per week on all basic rates of pay.

Across the board deals sidestepping performance elements also tackle the “fairness” agenda. At SELEX Sensors and Airborne Systems, April’s 3.5% increase applied across the board, performance-related pay having ended after 15 years. The 3.9% rise at the Principality Building Society was also applied across the board. And in the charity sector, where performance pay also plays a role, Save The Children’s 3% rise applied across the board, with no other changes to terms and conditions.

Consolidation of existing money from the pay “superstructure” into basic salaries (typically, switching money from bonus schemes and other variable payments to basic pay) can enhance the value of a straight percentage rise. At Grampian Country Pork (Ashton) a 62 pence per hour bonus was consolidated into all basic rates as part of the latest staged pay deal and this is now used in all calculations based on basic rate of pay, except overtime pay.

Construction, Energy and Water

Workplace Report (issue 61) has already highlighted big staged pay deals construction and electricity. Others include the 4% rise in electrical contracting (4.5% in 2009, 5% in 2010) and 4.4% in engineering construction (NAECI). Long-term deals are equally common in the utilities (3.9% in Three Valleys, 4.45% at South East Water). EDF, an increasingly dominant player in the UK, paid 4.35% to its Energy Customers staff and 5.1% to its Energy Powerlink staff. Scotia Gas Networks ended parallel three-year deal paying 4.6% to industrial and non-industrial staff.

Pay elements and allowances featured in over a third of the settlements: environmental engineering (4%) increased london weighting by £110 to £2,700. Heating and ventilating (3.5%) raised responsibility allowances, premium rates, daily travelling and nightly lodging allowances in line with pay. Balfour Beatty Rail Infrastructure Services (4.2%) spread its location supplements throughout the year (also introducing optional flexible benefits and cutting hours). Scottish and Southern Energy boosted its 4.6% with £500 lump sum payments, while the 2005 five-year pay deal at Yorkshire Water Services (core) increased both salaries and contractual allowances by 4.3%.

Pay systems and structures featured in a quarter of deals: Scottish Power, which paid 4.5% to Energy Wholesale staff and 4.65% Energy Network staff, provided extra money linked to its “scorecard” business performance schemes. At British Gas, Hay market data led to 3.3% pay rises. Drax Power’s bonus scheme was due to pay up to 5% of base salary, although its pay deal was also among the highest in the survey (7.1% [RPI plus 3.7%] and a £1,500 lump sum) reflecting intense skill shortages.

Working time and leave-related developments featured in one in five settlements: Colas Rail (3.9%) increased annual leave by 1 day to 26 days. Anglian Water increased standby and call-out payments. Shift allowances rose in line with base salary (4.8%) at Shell UK Oil (Stanlow). Springfield Fuels (3.8%) aligned annualised hours for former non-industrial and industrial employees.

Magnox Electric (a staged 12-month deal, 2% plus 1.8%) implemented a SMART pension arrangement, while staff were to be encouraged to use work life balance and flexible working policies at Dalkia Utilities (also staged, 2.25% from 1 April, 2.25% this month).

These two sectors account for 9% of agreements covering 19% of workers: 43 company agreements, 14 industry-wide construction agreements (accounting for 96% of workers covered). Settlement levels were on the high side at 4.2% (6.0% weighted) in construction and 4.3% (4.6% weighted) in energy, water, mining and nuclear. Just over half were long-term.

Freezes and imposed deals

Pay freezes were rarely implemented without compromise elements. Bargaining groups affected included BBT Thermotechnology UK (although a 3% increase from January 2009 has been agreed and an efficiency bonus could yield up to £1,000); the car delivery minimum standards national agreement where there was change to basic rate of pay in January); Home Delivery Network (where there were one-off gross payments of £350, or £175 for workers on less than 16 hours); and Terex (already hit by redundancies) where there was expected to be no pay increase without an upturn in the construction industry. Walford and North Shropshire College and manufacturer Cobble Tufting Machinery also had pay freezes.

More widespread were imposed pay rises. Although Payline is primarily a database of collectively-negotiated pay deals, rises were imposed without agreement in at least 27 cases (3.5% of agreements). Many of these were in the civil service, where the Treasury has been insisting on pay curbs, and included the 2007 police pay settlement. Other examples included Adam Smith College (3%), bus company Arriva Northumbria (including the final stage of a three-stage pay award in September 2007); Ecclesiastical Insurance (paybill increase 3.8%); and Hanson Brick (3%).

Finance, business and other services

These sectors together accounted for 11% of agreements, but while they include some very large banking employers and eleven public sector bodies (including the BBC and the now-nationalised Northern Rock) the overall number of workers covered is relatively small compared with other sectors. The “other services” sector had a midpoint of 3.5% (4.0% weighted) while in banking and finance (where performance-related pay predominates) it was 3.5% (3.9% weighted). Under performance pay the actual rises individuals receive may bear little comparison with the headline figure.

A number of the key finance sector settlements have already been reported in Workplace Report including the Nationwide Building Society, Royal Sun Alliance and the Royal Bank of Scotland (Issue 60); CFS, Abbey and HBOS (issue 59) as well as Barclays Bank (issue 51), where the three-year deal provides pay pot increases of RPI plus 0.9% (capped at 5%). Long-term deals are much rarer in these sectors affecting fewer than one in five agreements. Measures affecting pay systems and structures were the dominant theme in this sector, be it bonuses, incentive payments, progression or performance-related pay.

In the finance sector, Unite has been campaigning around the issue of fairness – including its opposition to “zero per cent” pay rises — and this is also a concern for trade unionists in other parts of the sector (see also Workplace Report’s coverage of two-tier pay systems in housing associations, Issue 60). At Resolution Asset Management where there was a total pay “spend” of 4.15% for clerical grades, no employees received zero increases: those judged to have “areas for improvement” got 2% across the board while “good performers” got 4% across the board (“very good” performers got 4.5% across the board, “excellent” performers a discretionary increase). In addition there was an underpinning of £500 for good performing employees on the lowest clerical rate.

A rougher ride to come

By industrial sector the energy, water, mining and nuclear industries recorded the highest pay settlement mid-point (4.3%, 4.6% weighted) followed by construction at 4.2% (6% weighted) and transport and communications (4.1%, 4.1% weighted). Matching the overall mid-point at 3.9% was the chemical, mineral and manufacturing sector (weighted 3.6%). A mid-point of 3.65% but a weighted figure of 4% in engineering suggests larger engineering firms have set the pace.

In retail, wholesale, hotels and catering the trend was more subdued with a mid-point basic pay rise of 3.2% This corresponds directly with the percentage increase in the adult rate of the National Minimum Wage implemented in October 2007 (the most recent increase, implemented this month, was 3.8%) emphasising the predominance of low-paid work in these industries.

Struggles to overcome bargaining fragmentation in the civil service, and the transport sector (as at Asda in 2006), and concerted attempts to tackle “fairness” including union action against “zero-per cent” performance pay, the use of underpinning one-off awards and other deals sidestepping performance elements have all been minority – but significant – elements of this pay round. Next month’s issue of Workplace Report will look in more depth at some of these trends.

With numbers of new long term deals holding steady these could provide a calm centre at the heart of the storm that seems to be descending on the economy. Despite the noticeable effect felt from inflationary upward pressures, the 2007-8 pay round could prove to be a model of stability in comparison with the year to come.

Median increases in lowest basic rates by sector

Private company * % (no.) Private multi- employer % (no.) All private sector* % (no.) Public sector % (no.) All employers % (no.)
Energy, water, mining, nuclear by agreement by workers

4.33 (32)

4.60 (32,259)

4.33 (32)

4.60 (32,259)

2.50 (2)

2.00 (5,000)

4.30 (34)

4.60 (37,259)

Manufacturing (chemical, mineral and metals) by agreement by workers

3.90 (35)

3.60 (14,435)

3.90 (35)

3.60 (14,435)

3.90 (35)

3.60 (14,435)

Manufacturing (engineering and metal products) by agreement by workers

3.60 (80)

4.20 (57,181)

3.00 (1)

3.00 (8,500)

3.60 (81)

4.00 (65,681)

3.90 (1)

3.65 (82)

4.00 (65,681)

Manufacturing (other), agriculture and forestry by agreement by workers

3.68 (98)

3.00 (31,406)

3.44 (18)

3.54 (421,600)

3.57 (116)

3.54 (453,006)

3.00 (1)

3.00 (6,000)

3.54 (117)

3.54 (459,006)

Construction by agreement by workers

4.00 (11)

4.00 (4,500)

4.45 (14)

6.00 (1,045,000)

4.20 (25)

6.00 (1,045,000)

4.20 (25)

6.00 (1,045,000)

Retail, wholesale, hotels and catering by agreement by workers

3.20 (36)

3.20 (742,100)

4.00 (5)

3.20 (111,380)

3.20 (41)

3.20 (853,480)

3.20 (41)

3.20 (853,480)

Transport and communications by agreement by workers

4.14 (196)

4.30 (127,970)

2.70 (1)

2.70 (3,000)

4.14 (197)

4.30 (130,970)

3.90 (18)

6.90 (167,083)

4.10 (215)

5.10 (298,053)

Finance and business services by agreement by workers

3.50 (48)

3.90 (56,021)

3.50 (48)

3.90 (56,021)

2.48 (4)

4.00 (10,391)

3.50 (52)

3.90 (66,412)

Public administration by agreement by workers

2.75 (4)

2.46 (765)

2.75 (4)

2.46 (765)

2.50 (38)

2.50 (610,769)

2.50 (42)

2.50 (611,534)

Education by agreement by workers

3.00 (18)

2.50 (932,401)

3.00 (18)

2.50 (932,401)

Health by agreement by workers

3.05 (4)

3.00 (717)

3.05 (4)

3.00 (717)

2.61 (4)

2.75 (1,378,900)

2.88 (8)

2.75 (1,379,617)

Other services by agreement by workers

3.85 (12)

4.10 (3,800)

3.50 (1)

3.50 (6,000)

3.60 (13)

3.50 (9,800)

3.00 (7)

4.00 (21,127)

3.47 (20)

4.00 (30,927)

All sectors by agreement by workers

4.00 (556)

3.50 (1,071,154)

3.90 (40)

4.40 (1,590,980)

4.00 (596)

4.00 (2,662,134)

3.00 (93)

2.75 (3,131,671)

3.90 (689)

3.20 (5,793,805)

The table shows the median percentage increase for each sector/employer type, followed in brackets by the number of agreements/workers covered.

Note that the number of workers covered is not known for all agreements.

* Includes voluntary organisations