The Covid effect: pay and earnings

The Covid-19 crisis has cast a shadow over every workplace, and a “tsunami” of further redundancies is widely expected. But its other effects, including on pay and earnings, have been very uneven.

While the vast majority of employees remained in their jobs, nearly 9 million were on furlough at the scheme’s peak in May, and the numbers didn’t fall below 5 million until late July. Unemployment statistics were slow to react but, seen alongside data on redundancies, vacancies, payroll employment and Universal Credit claims, these are exceptionally difficult times.

Young employees under 30 and those over 60 were most likely to be furloughed. Industrially, employees in arts and entertainment (45%) and accommodation and food services (43%) were affected most, followed by ‘other services’ (32%) and construction (22%).

The furlough rate was over 15% in some other sectors (administrative and support services, real estate, professional scientific and technical services, wholesale and retail, manufacturing, and transport and storage). But elsewhere it was much lower.

While unions were often able to negotiate full pay on furlough, average weekly earnings shrank in April, May and June (compared with a year earlier) across the private sector.

Pay survey

For some still in work, pay rises due since lockdown have been on hold, except where a statutory duty or a firm voluntary commitment required minimum wages to rise. But others have had pay rises very similar to previous pay rounds, and may even have received a “thank you payment” for their work.

Under these conditions, the LRD Pay Survey resembles something of a damage report this year. We have details of pay settlements in nearly 800 bargaining units, but have not been informed of the pay outcome in over 650 of the bargaining units which we reported on this time last year.

Where pay settlements have been reported, since the start of the 2019-20 pay round last August, half have been worth 2.55% or more on their lowest basic rate (the median increase) and 2.50% for most grades or workers covered (the standard median).

Weighted by the number of workers covered, the standard median was a little higher at 2.75% suggesting a slightly higher settlement level in deals covering bigger groups of workers. At an industrial level, the standard median increases (with a weighted figure in brackets) were:

Primarily private sector

• retail, wholesale, hotels and catering: 2.80% (2%);

• construction: 2.75% (0%);

• manufacturing (chemical, mineral and metals): 2.50% (2.80%);

• manufacturing (other): 2.50% (2.50%);

• transport and communications: 2.50% (2.20%);

• manufacturing (engineering and metal products): 2.40% (0%);

• finance and business services: 2.30% (2.45%);

• energy, water, mining, nuclear: 2.30% (2.30%); and

• other services: 2.30% (2%).

Primarily public sector

• education: 2.75% (1.80%);

• public administration: 2.63% (2.75%); and

• health: 2% (2.80%).

Different outcomes

What these Payline figures show is that, where unions have been able to negotiate (including where pay review body awards applied) basic pay levels have gone up in every sector, helped by statutory and voluntary minimum wage rises.

They broadly kept pace with the rate of retail price inflation, which did not fall significantly until most deals had been done. In April the latest-available inflation figures (for the year to March) were still showing RPI rising by 2.60% and CPI/CPIH inflation rising by 1.50%. Since then inflation has slowed.

Positive pay outcomes have not been confined to pay deals coming into force before the first lockdown. There are plenty of examples with settlement dates from April onwards. Neither are pre-agreed pay rises under long-term deals solely responsible for the median pay rises of around 2.50%, there are plenty of new, post-lockdown settlements worth that much or more.

But it is an incomplete picture this year. Some pay analysts – looking at results from a similar set of employers – may report more widespread pay freezes. Both versions of the 2019-20 pay round have something to offer. When the crisis eventually subsides and the post-pandemic labour market takes shape, some groups of workers will have a lot more “catch-up” to do than others.

Private sector pay

Our survey of the 2019-2020 pay round includes 591 private sector pay settlements, three quarters of the overall survey (but not three quarters of workers covered, as some public sector deals cover far more people). However there were 492 private sector bargaining units from the previous pay round that haven’t been reported, so it’s a very incomplete picture.

Among reported deals it hasn’t been a total pay “wipe out”. The median increase on lowest basic rates (among 511 deals) was 2.50%, as compared with 2.75% in 2018-19. The middle half of those deals were worth between 2% and 3% (previously 2.40% to 3.20%).

It was the same (2.50%) when measured by what most grades or workers got, the “standard increase” (2.62% last year) among 464 deals. The middle half of those standard increases were worth 2% to 2.90% (2.29% to 3% last year); and, weighted by workers covered, the median was 2% (2.90% last year).

Average weekly earnings

It’s a significant outcome, knowing that Average Weekly Earnings in the private sector shrank after lockdown (when millions went on furlough). The chart above confirms that almost half of private sector deals increased the lowest basic rate by between 2% and under 3%.

Many of these private sector deals came into force before the national lockdown started on 23 March, or were the result of pay rises negotiated in advance under a staged or long-term deal. But among 186 post-lockdown “new” private sector deals the median lowest basic increase matched the overall survey at 2.50% while the standard increase was only a little lower at 2.10%. So as far as these known deals are concerned, they have broadly held up.

Freezes or cuts

There were 40 reported cases where pay rates were frozen, and several more where pay rates were cut. Half were in manufacturing and included big employers like aerospace manufacturer Rolls Royce where there was a one-year 10% “pay delay” which will be paid back starting from April 2021. Safran Landing Systems (repair and overhaul) agreed a pay freeze for 2020/21 to save 24 jobs.

In the automotive sector, which was already struggling before the pandemic, Ford workers agreed to defer a contractual pay award due in November 2019 (for 12 months) but with an non-consolidated lump sum (3% of annual basic salary, paid in January 2020). At BMW (Rolls Royce Motor Cars) the pay award took the form of a one-off payment of £1,100 for all non-management staff.

That approach, freezing pay but providing a cash award, was applied in some other manufacturing firms. Allied Glass (Knottingley) agreed a £300 one off-payment and a £200 attendance bonus for 2020, with a proviso to reopen talks if trading improves. Motor parts manufacturer Adient in Ellesmere Port agreed a lump sum payment of £405 to be paid in November 2020 (plus a 2% increase from 1 March 2021, but with the option to renegotiate).

In transport, pay was frozen at the First Glasgow bus company and there were pay cuts of 20% for pilots and 5% to 10% for cabin crew at Ryanair, to save jobs. The pay cuts will be reversed in 2023 and 2024 (or earlier if the company returns to pre-Covid-19 levels of business sooner).

There were pay freezes at the Zoological Society of London (London Zoo) ZSL, at Birmingham Royal Ballet (as elsewhere in the theatre sector) and under the Construction Industry Joint Council (CIJC) (the biggest agreement in the private sector, covering over 500,000 workers).

Many of these known freezes and cuts fell in sectors making most use of the furlough scheme. It may also be significant that transport and storage, and manufacturing, were strongly represented among deals that were unreported in this year’s survey.

There are private and voluntary sector settlements in public administration, health and social work, and education, although most are public sector deals. At privately-run HMP Northumberland, there was a 2.50% increase for prison staff on Sodexo terms and conditions. But at Barnardo’s, it was a pay freeze.

“Thank you” pay

In contrast, though, there were also more valuable private sector deals, implemented both before and after the national lockdown, influenced in some but not all cases by minimum wage rises and the voluntary Living Wage.

The 4% pay deal at Hovis (Belfast) came into force from 1 January, as did the 5% Offshore Diving Industry settlement, while Barclays Bank increased minimum salaries by up to 4.55% under a 2.75% pay bill settlement from 1 March 2020.

But rises of 5% in the 2 Sisters food group (West Bromwich) came into force in April, as did similar or bigger increases for the Co-operative Group Retail (team leaders/post office supervisors), for some retail staff at Well Pharmacy, and for warehouse operatives at Boots Logistics. These would all have been “essential” services.

A range of private sector employers also paid “thank you” payments. There were 10% bonuses or enhancements at a number of retailers (including Argos, B&M Heron Foods, Ocado, Sainsbury’s and Tesco) while Asda and some co-operative stores paid an extra week’s pay. Morrisons paid a 6% quarterly bonus (worth approximately £1,050 for full-time staff).

Cardboard manufacturer Glatfelter in Caerphilly paid £300; WestRock Multi Packaging Solutions in Leicester £650; and Thales Optronics £1,000. LloydsBank awarded £200 worth of shares, while TSB paid out £500 (as did Your Housing Group/Fix360). Clearly, it would be wrong to see the Covid recession as “pay cuts all round”, at least for those who managed to keep their jobs.

Public sector pay

The pandemic revealed just how important the work done by all essential workers is. So while NHS Agenda for Change pay awards were applied in April, under the third year of a three-year deal, health unions began agitating around calls for higher pay.

UNISON, for example, called for at least £2,000 to be added to every NHS pay point by the end of this year; the Royal College of Nursing has set a target increase of 12.5%; and there are also grass roots campaigns like NHS Workers Say No, and Nurses United pushing for more.

Health and other public sector unions remember well the years of pay freezes and caps that were part and parcel of austerity following the 2008-09 recession, but a degree of relaxation meant that in the 2019-20 pay round, public sector deals had a slight edge over known private sector pay rises.

Among 207 public sector deals in this year’s survey, the median increase on lowest basic rates (based on 163 settlements) was 2.75%, as compared with 2% in 2018-19 (see also the table on page 19). The middle half of those deals were worth between 2.40% and 3.29% (previously 1% to 3.50%).

The level of pay rises was a bit lower (2.60%) when measured by what most grades or workers got, the “standard increase”, but higher than last year (1.50%). The middle half of those standard increases were worth 2.20% to 3% (2% to 2.90% last year); weighted by workers covered, the median was 2.75% (2.9% last year).

As with the private sector there were a substantial number of deals missing from this year’s survey, but probably not for the same reasons. Public sector employers weren’t expected to use the furlough scheme and take-up levels among eligible staff were only 1% in public administration and 6% in education and health and social work.

Health and social work sector

Bargaining tends to be more centralised in health and social work, but it is now centralised at the level of the devolved nations. Variations in Agenda for Change (based on recommendations by the NHS Pay Review Body) are too detailed to summarise here, but in its third year it generally provided for increases of between 2% and 3%.

Taking the case of Wales, a three AfC year pay agreement from 1 April 2018 simplified the pay structure and consolidated supplements, shortening the pay ranges and removing overlaps, allowing staff to move to the top of their pay band more quickly. Those and other changes were underpinned by the voluntary LWF Living Wage (£9.30 per hour).

Standard increases for NHS doctors and dentists, also based on pay review body recommendations, were typically worth 2.80% (but delayed in NI). The JNC for Youth and Community Workers is the other big national agreement in the sector. From September 2019, under its existing two-year deal, the main increase was 2% on higher pay points but, with cash awards lower down and the removal of pay point 2, gave lower-paid staff up to 8.12%.

Public administration

Public administration delivers the biggest but also the widest range of public sector settlements in the survey. The biggest pay deal in the UK labour market is that negotiated by the Local Authorities (England & Wales & N Ireland) NJC, which from 1 April delivered a 2.75% pay increase.

Its Scottish equivalent (the SJC) awarded 3% under an existing three-year deal, with a commitment to fully consolidate the Living Wage in all Scottish councils. In addition, from 1 April 2020, the Scottish government agreed a pay increase with local authorities for adult social care workers so they all receive the minimum Scottish Living Wage of £9.30 PH (covering all hours worked, including sleepovers and personal assistance.

The Fire Service (firefighters) settlement in July was for 2% (separate Scotland level negotiations did not reach a conclusion). The Police Staff Council (England and Wales) negotiated a basic rise of 3.10% on the lowest pay point and a standard rise of 2.50% from September 2019.

In the civil service, Grades AA-HEO at the Department for Work and Pensions (DWP) had 2.50% imposed from July, while the 2.30/2% Ministry of Defence MOD (Non-industrials) award dates back to August 2019. There were many other departmental and agency level awards, within guidelines set by HM Treasury, and distinct negotiations also within Scotland, Wales and Northern Ireland.

The sector includes five pay awards based on pay review body recommendations:

• Armed forces: 2%

• Police (England and Wales): 2.50%

• HM Prison & Probation Service (Prison Service Pay Review Body remit group): 2.50% on closed grades and Fair and Sustainable pay bands (the latter have progression increases)

• Senior Salaries Review Body (SSRB): a 2% paybill increase for the Senior Civil Service, 2% for the Judiciary and 2% for Senior Military Officers

• National Crime Agency (NCARRB Review Body): 2.50% from 1 August 2019 but 4.25/4.50% on the lowest two grades.

Education

The biggest education bargaining group (included in our public sector figures) is the UK-wide higher education JNCHES agreement. Unions rejected a pay offer for 1 August 2019 but the employers’ association UCEA refused to negotiate further and advised universities to implement it.

It involved a 1.80% increase to spine points 17 and above, increases of up to 3.65% for lower paid spine points and the abolition of spine point 2 (the lowest paid spine point) ensuing that pay rates exceed the Living Wage Foundation Living Wage, where the working week is 35 hours.

Pay awards for school teachers are now negotiated (or set by government) separately in Scotland, Northern Ireland, Wales and England (based, in Wales and England, on what are now separate pay review body reports). In England the September 2019 pay award was 2.75% on all pay ranges and allowances, while Scotland’s negotiated award was 3%.

The survey includes a range of national settlements in further education, from a 2.75% award in Wales to a final stage 1.25% settlement for support staff in Scotland, but the pay awards actually implemented in English colleges vary widely. Looking beyond these state services, the Construction Industry Training Board had a pay freeze from 1 April 2020 after a planned increase of 2.54% was cancelled due to the Covid-19 pandemic.

Other public sector deals

There is more variety in public sector bargaining than these big national deals suggest.

• Forestry and Land Scotland: an interim £750 cash underpin for staff earning £25,000 or less and 3% between £25,000 and £80,000;

• National Nuclear Laboratory (NNL): a 2.8% increase to base salaries and allowances;

• Low Level Waste Repository (LLWR): a 1.8% increase to basic pay and allowances from 1 April 2020;

• Network Rail – Maintenance: a 2.20% increase based on RPI inflation for November 2019, underpinned by a minimum £575 (pro-rata for part-time);

• George Best Belfast City Airport: 2.90%;

• BBC (staff): a 2.68% increase from 1 August 2019; and

• Sport England: a 2% consolidated increase, underpinned by a minimum £500.

Minimum wages in the Covid pay round

The Financial Conduct Authority (FCA) estimates that 12 million people in the UK struggle with bills or loan repayments, with 2 million having fallen into that position since February 2020. It says almost a third of adults (31%) have seen a decrease in income, while those from a Black and Minority Ethnic (BAME) background were more likely to be affected (37%).

There were already over 8 million workers on furlough when the 1 April increase in statutory minimum wage rates fell due. With their agreement, employers could legally cut pay to 80% of their usual wages even if that meant paying them less than the statutory minimum wage. Shrinking Average Weekly Earnings in April, May and June told their own story.

Nevertheless, many employers went into lockdown with a duty to raise wages that were pegged to statutory minimum rates including the National Living Wage (NLW). Despite the pandemic, 1 April was the point at which a longstanding government target to raise the National Living Wage to 60% of median earnings arrived, and with it, pay rises of up to 6.5% were due (see box).

More remarkable, in many ways, was that a wide range of employers were also willing to follow through on a commitment to pay the voluntary Living Wage, worth at least 58p per hour more.

Raising the statutory minimum

Rising statutory minimum wages helped to boost a range of collectively-agreed pay settlements:

• the Wilko retail chain agreed a 2% pay rise from 1 April but the lowest paid got 2.5%, thanks to the NLW uplift (plus a £150 “thank you” payment, see page 16);

• support staff at Sixth Form Colleges on pay point 1 got 3.6%, to comply with the NLW, while other pay points went up by 1.25%;

• at Defence Equipment and Support (DE&S) all staff, including apprentices, received at least the NLW, raising the L1 minimum salary by 6.2% to £16,777; the higher L2 minimum increased to £19,044, and there were individual increases worth 2.25%;

• the national Racing Staff agreement raised pay rates in line with the NMW/NLW, resulting in increases from 0.22% to 4.33%;

• the National Trust (England/Wales/NI) felt unable to commit to the voluntary Living Wage this year, but implemented the 6.2% NLW increase for grade 11 and raised grade 10 by 2% to maintain the differential. There was no pay award for grades 1 to 9 but there was a negotiated 100% furlough pay scheme that applied to flexible/zero hours staff;

• Compass at Tata Steel Port Talbot applied the 6.2% NLW increase to cleaning and canteen staff but also retained a 15 pence per hour differential; and

• Lightbody applied the NLW 6.2% increase for team members but also increased the rate for skilled team members by 8.4% (a re-grading exercise was due to remove all grades but “red circling” anyone adversely affected).

A new target was set for the NLW to reach two-thirds of median earnings by 2024, but the pathway to that has not yet been defined by the Low Pay Commission, given uncertainty about the impact of the ongoing Covid-19 outbreak.

Going beyond the statutory minimum

The national Living Wage Foundation rate went up by 3.3% last November, long before the pandemic arrived in the UK, but conforming employers have six months to implement it, with many pay awards based on the voluntary Living Wage due after the lockdown began.

Heathrow Airport Ltd reneged on an agreement to pay contracted-out staff the London Living Wage, affecting ISS and Mitie.

But over 6,500 employers are now formally committed to paying the voluntary Living Wage, with more using it as guide or moving towards implementation. The Living Wage Foundation said in November that 210,000 people stood to benefit directly from the latest increase (although over 5 million still earn less).

Tulip Fresh Meats Ltd (Bristol) went well beyond the NLW, with a 9.6% pay uplift to a minimum of £9 per hour (PH) (other staff got 2% and a day’s extra annual leave).

Pay was frozen at the Fire Service College but Capita (which acquired the college in 2013) announced in September 2019 that all its employees would be paid at least the LWF rate from 1 April 2020.

In the local authority field, street cleaning staff working for Serco at Milton Keynes Council saw pay increased in line with the Living Wage rate, giving an increase of over 6% for the lowest paid. The Oxford City Council deal saw staff on the bottom scale point of grade 3 paid no less than £10.40 PH (above the new Oxford Living Wage of £10.21 PH).

The Living Wage was promoted through the Scottish Government’s pay policy, influencing a wide range of pay rises this year. At the Scottish Prison Service apprentices continue to be guaranteed the Living Wage; and although National Trust of Scotland had a pay freeze for most staff, it paid the Scottish Living Wage as a minimum, giving grade 1 and some grade 2 staff a 3.3% increase.

Living Wage jobs

With employers adopting the voluntary Living Wage, a wide range of jobs are being paid more this year despite the Covid crisis:

• train cleaners: at Axis Cleaning Services (Transport for Wales) Alstom Class 175 Contract a 3.3% increase last November took the rate to £9.30 PH while the train cleaning supervisor rate rose to £10.33 PH;

• university café staff, cleaners and security guards: BaxterStorey at the University of Greenwich agreed to pay the London Living Wage from May 2020, delivering a 23% increase for cleaners and up to 16% for café workers;

• theatre staff: Belgrade Theatre Coventry maintained its commitment to the Living Wage, delivering a 3.33% increase in the pay minimum (other staff were due a 2.75% increase);

• rail revenue and gateline staff: at Carlisle Support Services (Northern Trains) a rise to the LWF rate produced a 13.3% increase for staff previously on the NLW;

• security, cleaning, catering and facility management services: the Cabinet Office agreed to make its contract with Interserve a London Living Wage contract;

• hospital porters, cleaners and caterers: Mitie at West Hertfordshire NHS Trust increased pay from the NLW up to the “real” Living Wage from 1 November 2019; and

• parking enforcement officers: at NSL (Royal Borough of Kensington & Chelsea) the London Living Wage (£10.75 PH) became the minimum rate.

How Covid has affected bargaining

The coronavirus has disrupted work in so many ways, and with it the normal course of pay bargaining and industrial relations. The following examples highlight some of the challenges that negotiators faced in the second half of the 2019-20 pay round.

Public-facing services

Public administration, education, and health and social work did not see significant levels of furloughing, as the table (right) shows. However, pay talks were delayed at the Army Foundation College (Pearson TQ), and at children’s charity the NSPCC (where a fluctuating number of staff were furloughed).

In contrast, customer-facing art, culture and recreation businesses still had 45% of eligible jobs on furlough by the end of July. Pay negotiations were postponed at Sheffield Theatres and at the British Film Institute (BFI), where consultation with the Unite and BECTU unions quickly turned to furloughing plans and reduced working hours.

Furlough at the National Gallery depended on which contract staff were engaged on, but Sodexo staff with a mobility clause went to work at alternative sites (mainly NHS locations). Pay negotiations were delayed in the housing sector too, at Halton Housing and Plus Dane Housing Group.

Food wholesaler Bidfood saw around 70% of its volumes and contracts “switched off” with lockdown but managed to win a contract for care shield packs and Nightingale hospitals. Unions negotiated a temporary national agreement to avoid 960 compulsory redundancies, and reduced working time.

Manufacturing, transport and storage

These two sectors saw furlough levels still at 16-17% by the end of July and pay negotiations seem to have been quite widely disrupted. That was the case at Bakkavor Meals London, where shopfloor staff were required to remain at work, and helicopter manufacturer Leonardo, both seen as key industries.

Pay talks at Liberty Steel Tredegar and Lloyd Walters Industrial Services (Tata Steel) were put on hold due to Covid-19, but were due to restart in October 2020. The automotive sector was hit hard both by layoffs (furlough) and redundancies (at companies like Bentley Motors in Crewe) and delayed pay negotiations (at Vauxhall Motors, Grupo Antolin [Magna Hartlip 3] and Rudolph & Hellmann Automotive).

Best Food Logistics saw big shortfalls in work, although laid-off staff were subsidised by Tesco/Booker instead of being furloughed. Unions negotiated job protection through an informal agreement for staff to be transferred to other businesses within the group on a short term basis.

Elsewhere in the sector pay discussions were put on hold at: Clarks Logistics; Co-operative Retail Logistics – National Warehouse & Clerical Agreement; Glasgow Prestwick Airport;Kuehne & Nagel (Whitbread, Feltham Contract); Great Western Railways; and Royal Mail Holdings (Finance Operations).

Other sectors

Pay negotiations were suspended at Veolia Recycling and Waste Authority (Merseyside and Halton) (with 70% of staff furloughed and 15% working from home). It was a similar picture at Scottish Water, as discussions over the possible implementation of the Scottish Government public sector pay policy took place.

Elsewhere in the utilities sector, negotiations were delayed at Scottish Power Energy Retail. At Northern Gas Networks (Operational Staff), where an initial offer had been rejected, the company subsequently offered less after an interruption to pay talks due to Covid.

Pay negotiations were delayed at ATOS - BTS (Lytham) where 90% of staff were working from home (something negotiators fought for as an alternative to furloughing). At the Royal Bank of Scotland about 10,000 staff continued to work in branches and offices, but approximately 50,000 were advised that they would continue to work from home until at least 2021.

The LRD 2020 Pay Survey is available at www.lrd.org.uk/index.php?pagid=102