‘Slow burn’ as pay settlements increase by 2.7% on average 


This time last year, Bank of England chief economist Andy Haldane thought he saw signs of a “new dawn” breaking for pay. Instead we’ve seen more of a slow burn in negotiated settlements. Half of all pay deals effective between August 2018 and July 2019 increased lowest basic rates by 2.7% or more (2.5% or more for most grades or workers).


These results are not that different from the improved settlement levels seen in 2017-18, although with fewer top-end settlements. Uncertainty about Brexit — as flagged up recently in Bank of England agents’ reports — may be one factor, but the big guns of the public sector have had more of an impact on pay, helping to balance off a slightly reduced level of private sector settlements.


A strong labour market has probably helped sustain pay and earnings growth, despite talk of a possible recession. There has been a resurgence in long-term pay deals, allowing more workers and employers to “bank” future improvements, and some negotiators have addressed insecurity in other ways. 


LRD pay survey


The latest annual pay survey, LRD’s biggest to date, is based on pay outcomes among 1,126 pay deals in the 2018-19 pay round. The survey was made possible thanks to the continuing support of trade unionists at all levels and subscribers to LRD Payline database. 


The main findings are: 


• a 2.7% median (mipoint) increase on lowest basic rates in awards effective between August 2018 and July 2019 (based on 926 pay settlements where that figure was known); that is slightly down on the 2.75% increase in the 2017-18 pay round;


• the “lower quartile” — the midpoint of the lower half of settlements — was 2.0% (2.0% in 2017-18);


• the “upper quartile” — the midpoint of the top half of settlements was 3.2%, (3.7% in 2017-18);


• the private sector median was 2.75%, (3.0% in 2017-18); and


• in the public sector the median was 1.5% against 1.0% in 2017-18. 


These, and corresponding figures for 2017-18, are set out in table 1


Examples of a 3.2% increase include mobile phone provider EE, Airbus UK, construction equipment group JCB, defence group Babcock International Marine & Technology (industrial staff, Devonport), industrial gas group BOC (drivers) and rail freight Freightliner. 


The public sector upper quartile of 3.5% represents bargaining units within Network Rail, but a more varied set of public sector deals provided lowest-basic rises of 3.0%.


They include the Local Authorities (Scotland) national agreement and its parallel craft and chief executives/officers bargaining groups. Councils represented in these negotiations by the Convention of Scottish Local Authorities (COSLA) employ over 240,000, almost 10% of all jobs in Scotland. That level of increase reflects a distinctive approach to public sector pay taken by the Scottish government.


Other examples of a 3% public sector pay rise can be seen at the air traffic control public-private partnership NATS (for Air Traffic Systems Specialists/Air Traffic Control Officers), NHS Business Services Authority (an arms-length body that which follows NHS Agenda for Change terms and conditions); House of Commons catering staff; and the National Gallery.


Standard increase


The “standard increase” applies to most grades or workers and is usually a bit lower. Based on 872 pay awards, the median “standard” increase is 2.5%, as it was in the 2017-18 pay round.


The private sector increase is 2.62%, against 2.75% in 2017-18. 


Meanwhile, the public sector increase, the standard median is 1.5% against 1.0% the previous pay round. 


The biggest difference between these two types of pay rises was at the BBC where the 2018 deal raised the minimum salary by 25% to £20,000, while other rates were only increased by 2%. 


Other examples included Sodexo HMP Northumberland Prison (where staff on Sodexo terms and conditions got 2.5%, but the Prisoner Custody Officer starting salary increased by 9.33% to £22,700); and for school teachers in Scotland, where a 7% second-year increase came with scale shortening worth 13.3% for some staff. 


None of these figures take account of the varying number of workers covered by different deals. The overall “weighted” standard increase is 2.75%, up substantially from only 2.3% in 2017-18. 


Industrial sectors


Most of the pay settlements in the survey come from four big industrial sectors, whose median pay rises (lowest basic increase and standard increase) are set out in table 2: transportation and storage (3.0%/3.0%); manufacturing (2.7%/2.62%); public administration, defence and compulsory social security (3.0%/2.0%); and education (1.0%/1.0%). 


Public administration settlements include the Local Government NJC and the Scottish local authorities’ pay deals, as well as police and prison pay settlements (influenced by Pay Review Body recommendations). 


Devolved civil service agreements followed government guidance, allowing 1% to 1.5% for average pay awards, but potentially more for productivity improvements. The education sector, on the other hand, includes a number of English FE colleges that failed to apply the increase recommended by the Association of Colleges (1% or £250, whichever greater, see Workplace Report, July 2019, pages 15-17).


Among the other sectors listed in table 2, several exceeded the main survey medians on lowest basic rates, including wholesale, retail and repair; accommodation and food service activities; water, sewerage, waste and remediation; administrative and support services; finance and insurance; and electricity, gas, steam and air conditioning. 


Examples of settlements in all these and other industrial sectors will be presented in the online LRD Pay Survey. More details can be accessed by subscribers to LRD Payline. 


Company/multi-employer deals


Pay deals negotiated at private company level, accounting for two-thirds of the survey, tended to be worth a little more, with a median lowest basic increase 2.8% and a standard increase of 2.7%.


The biggest private company pay deal in the survey is Usdaw’s agreement with Tesco which increased hourly rates by 3% last November, completing a 10.5% pay rise implemented through four stages. Its September 2019 settlement raised the minimum hourly rate by 6.9% to £9.00, plus skill payments, but ended the 3.5% annual bonus. 


Royal Mail Letters (Royal Mail Holdings) provides the largest non-retail company settlement in the survey with a year-three increase of 2% to basic pay and most allowances. 


Pay is negotiated at a higher, national or sector level In a number of industries and applied by conforming employers (see table 3 for examples of such deals). There are only 33 private sector multi-employer agreements in the survey, 3% of deals, as most private sector bargaining is done at company level, but they can affect large numbers of workers, particularly in the construction industry. Their median value in 2018-19 was 2.75%, with a 3.5% standard increase.


A number of the big public sector deals are also, in effect, multi-employer bargaining units. They had a 2.9% median increase on lowest basic rates, but a more subdued standard increase of 2.15%. 


That difference suggests they targeted more money towards the lowest paid, and that was certainly true for the two “big guns”, the Local Authority Services NJC (England, Wales and Northern Ireland), and NHS Agenda for Change. 


Each of these two agreements covers well over a million workers and it is possible that their pay awards had some impact on the accelerating level of average weekly earnings.


Agenda for Change has been implemented differently in England, Scotland, Wales and Northern Ireland, while the revised NJC pay spine is implemented through varied local authority grading structures.


Some non-NHS settlements, such as Sodexo, Wythenshawe Hospital, followed the Agenda for Change pay award,while some non-local authority employers followed the NJC award (Learning Partnership West, previously Connexions, and Independence Matters and Norse Care in Norfolk). 


However, at Serco Environmental Services (Haywards Heath), staff pulled out from the tie-in to NJC pay awards, and local collective bargaining was due to commence from October 2019.


Impact of minimum wages


New National Living Wage (NLW) rates came into force in April, raising the statutory minimum for workers aged 25 and over by 4.85% to £8.21 an hour. 


It followed earlier rises, from November 2018, of 2.86% in the voluntary Living Wage to £9.00) and 3.43% in the voluntary London Living Wage (to £10.55). 


In London, the rate is set by the Greater London Assembly and the rate outside of London by the Living Wage Foundation (LWF). The increases gave a lift to 180,000 workers, and were guaranteed by 4,700 Living Wage employers across the UK including over 1,500 in London. The number of accredited Living Wage employers has since risen to over 5,500.


In the survey, 11.2% of deals were influenced either by the statutory or voluntary Living Wage (divided equally between the public and private sectors). As might be expected, they had more of a gap between their lowest basic rate median increase (3.4%) and their standard median increase (2.0%).


However, many had not simply limited higher, minimum age-related pay rises to their lowest-paid staff, as the following examples show: 


• formal agreement to pay more: negotiated “tracker” paying 12p per hour (previously 10p) above the NLW and the under-25 NMW (Polypipe Building Products); 


• underpinning a negotiated rise: 3% or at least 5p or 10p more than the NLW for a lower-paid grade (Phoenix Healthcare Distribution);


•  paying NLW-plus: uplift to new NLW rate plus a further 2% (Stena Line Seafarers); following the NLW rise, £8.71 becomes the default lowest rate for any staff working hours between 6am and 6pm (Xpo Logistics Tesco Contract),


•  maintaining/improving differentials: 4.9% increase to NLW for the lowest grade, 38p on other hourly rates (Carlisle Support Services, Arriva Rail North); 5.6% for the lowest-paid (6p above the NLW) but with 8%, to 12% for higher-paid grades (2 Sisters Food Group (Derby))


•  maintaining/improving premia: 7.8% on the night shift premium for NLW workers (2 Sisters Food Group (Sunderland)); some overtime rates increased to maintain a premium of at least 125% (Kettle Produce)


•  better pay for young workers: 21-24 NMW from age 16 (Agricultural Wages Order, Wales); all age bandings removed with an 11.25% rise to the NLW for under-25s (International Fish Canners);


•  thinking ahead: 2% pay rise with a commitment to devise a plan to look at NLW predictions and what impact they have on the skills payment gap (DHL Faverdale (Argos))


•  aiming higher: 4.9% plus a further 2% for staff on the NLW, making steps towards paying the Scottish Living Wage in 2020 (Glasgow Prestwick Airport); acknowledging LWF guidance, but unable to commit yet, 4.5% pay bill increase (National Trust (England, Wales, NI)); aiming to reach the LWF Living Wage while committed to paying above the statutory NLW (Newbury College).


Long-term/inflation-linked deals


Long-term deals provide a measure of certainty and grew in popularity in 2018-19. 


In the survey, 36.9% of pay settlements are the result of a deal lasting for 21 months or more (typically for two or three years), a higher level than in the 2017-18 pay survey (30.4%). They provide a median increase of 3.0% on lowest basic rates, or a 2.75% standard increase. New long-term deals account for 10.2% of pay rises in the survey, giving median rises of 3.0% on lowest basic rates, the same as the standard increase. 


Inflation-linked deals account for 6.75% of pay rises in the survey, down significantly from just under 10% in the 2017-18 survey. They have a median value of 3.0% (on their lowest basic rate and standard increase). Those linked to the Retail Prices Index (RPI) have a median rise of 3.1%, a smaller number linked to the Consumer Prices Index (CPI) have a lower median value (2.5%, standard 2.48%). Almost all are long-term deals. 


Insecurity/inequality


In this age of precarious work, it is worth noting the many different ways in which some of the pay deals in this year’s pay survey addressed insecurity and inequality. 


One way that has been achieved is simply by representing and bargaining for vulnerable groups of workers. A new Unite recognition agreement at Mitie Security (Southampton General Hospital), for example, provided a 14.5% increase for security officers and 7% for security supervisors, with provision also for injury pay and personal protective equipment. 


An existing RMT pay deal covering cleaning staff on the Churchill (Tyne & Wear Metro Contract) agreement provided free Metro travel for nominated partners; guaranteed that overtime will not be contractual, compulsory or rostered; and made provision for a mutually agreed number of equality reps. 


There have also been significant achievements for union-backed campaigns in well known workplaces even where recognition is lacking, in companies like Amazon, McDonald’s and JD Wetherspoon, but a range of bargaining issues have also been addressed within union-negotiated pay deals.


BECTU-graded staff at the English National Opera on permanent, seasonal and fixed term contracts (excluding those covered by the London Living Wage, who received the November Living Wage Foundation increase) had a £375 consolidated increase in 2018. All other casual staff got 1% from 1 April 2019. 


Agency workers were included in the 3% base pay/bonus deal at BMW Mini, while at Sopra Steria (HM Passport Office Contract), agency staff rates were uplifted in line with staff in the bargaining unit (a 2% increase, underpinned by a minimum £400). Agency staff employed by Staffline Recruitment at Pirelli Tyres received a negotiated 3.5% increase in basic and shift pay from 1 January, and a new £50 premium for working bank holidays. 


At MTR Elizabeth Line (formerly MTR Crossrail), under an existing three-year agreement, which provided a 2.5% pay rise in April, uncovered/unsocial hours are to be offered to agency workers only after full/part-time staff hours have been exhausted, and agency workers are to be kept to a minimum, with recruitment continuing throughout the staged opening programme. 


A commitment to create more permanent positions was also part of the pay deal at AkzoNobel (Paints & Coatings).


Under the terms of its 2.5% March pay rise, Amey Consulting Rail acknowledges that Graduate Scheme members on long-term placement are included in bargaining.


And at the Northern Ireland Audit Office, there was an increase for students working their sandwich year there in line with the voluntary Living Wage.


The pay deal at technology systems manufaturer Teledyne e2v, Chelmsford, included a commitment to a guaranteed job offer for apprentices on completion, and a minimum £18,000 a year for direct employees after trial on a short-term contract. And at Highlands & Islands Enterprise, all staff aged 18-24 benefit from 100% funding in support of further education applications.


Improved layoff or downturn policies were part pf the pay bargaining agenda at car parts firm Magna Exteriors (Halewood) and car industry supplier Stadco Powys. At DHL (Sainsbury’s) Bedford, the contractual notice period was increased from one to four weeks.


Regional pay disparities were partly ironed out at finance company Vaultex. There was a 2.8% pay scales increase in the Northern region in line with the voluntary Living Wage increase, but no change in the Southern region as scales were already above the London Living Wage.

www.lrd.org.uk/payline/supplement/LRDPaySurvey2019Printable.pdf