Workplace Report April 2017


Is it time to dust off the slogan Britain need a pay rise?

Half-way through the 2016-17 pay round, there has been plenty of focus on minimum wages, but no sign of a general pick up in pay. And with rising inflation eating away pay increases, unless more money finds its way into the pockets of more employees, the squeeze on worker’s living standards that followed the 2008-09 recession could return. 

The picture that emerges from a survey of 380 settlements drawn from the LRD Payline database is that: 

• there’s been a small rise in the overall value of pay deals for those on the lowest basic rates, particularly this month with the 30p rise in the National Living Wage;

• one in five pay deals in the survey have been affected by statutory or negotiated measures to boost pay for the lowest paid; 

• however, there is no real movement in the overall midpoint of pay rises (the median) for most grades or workers;

• the many long-term deals in the mix aren’t generally delivering bigger pay rises, unless they include an explicit inflation link, which most do not;

• the 1% pay cap continues to affect many workers, who are covered by public sector pay deals, even where minimum wage measures are lifting lowest basic rates; and

• almost one in 10 agreements changed or improved pay additions or bonuses, which can top up earnings, but switching money into basic pay to meet the National Living Wage is something some employers are still doing.


The 2016-17 pay round so far has taken place against a backdrop of rising price inflation, steady employment growth and a falling unemployment rate, but these have not yet produced an upturn in pay deals.

It has been clear since the EU referendum that inflation would increase and it is now running at 3.1% on the traditional RPI measure and 2.3% on the CPIH measure. 

The number of people in work continues to increase, while the number of people unemployed (1.56 million) or “economically inactive” is falling. The unemployment rate has dropped to 4.7% and has not been lower since 1975. 

Set against this background, funding for average pay awards in the public sector is still limited to 1%, to be applied, the government says, in a “targeted” manner. The approach being taken in Scotland and Wales is different, but public sector workers there are still affected by central government policies. 

Nevertheless, public and private sector employers alike are required to comply with statutory minimum wage rates. These have risen not once but twice during the 2016-17 pay round (see Table 1). They rose initially last October when the under-25 age rates of the National Minimum Wage (NMW) went up, and there have been further small rises in those rates again this month. 

More significantly, April also saw the second instalment of the National Living Wage (NLW) for workers aged 25 and over (in reality, the top tier of the NMW). It went up by 4.2% from £7.20 to £7.50 and is on a path to reach 60% of median earnings by 2020. Cumulatively, all of the NMW/NLW rates have risen by over 4% and it is now expected that 8.5% of workers (up to 2.3 million) are on one of the minimum wage rates.

Table 1: National Living Wage and National Minimum Wage

Pre-October 2016 October 2016 April 2017
Age 25 and over £7.20 £7.20 £7.50
(no change) 
(up 4.17%)
Age 21-24 £6.70 £6.95 £7.05
(up 3.73%) 
(up 1.44%, cumulative 5.22%)
Age 18-20 £5.30 £5.55 £5.60

(up 4.72%) 
(up 0.90%, cumulative 5.66%)
Under 18 £3.87 £4.00 £4.05

(up 3.36%) 
(up 1.25%, cumulative 4.65%)
Apprentice under 19 or in first year £3.30 £3.40

(up 3.03%) (up 2.94%, cumulative 6.06%)

Pay survey

With that as a backdrop, Workplace Report this month reviews what we know so far about pay settlements negotiated and applied in the 2016-17 pay round to date. The survey is based on 380 settlements drawn from the LRD Payline database, where pay rises have been stuck around a midpoint of 2.0% for some time. 

Table 2a: Pay increases - all settlements

August-September 2016 October 2016-March 2017 April 2017 Whole survey period
Increase on lowest pay rate
Lowest 25% 1.00% 2.00% 2.00% 1.75%
Median 2.00% 2.05% 2.42% 2.20%
Top 25% 2.73% 2.67% 3.35% 3.00%
Settlements 57 187 90 334
Standard increase
Lowest 25% 1.00% 2.00% 1.55% 1.50%
Median 1.06% 2.00% 2.00% 2.00%
Top 25% 2.00% 2.50% 2.67% 2.50%
Settlements 42 167 79 288
All settlements
Count 69 213 98 380

Table 2b: Pay increases - private and voluntary sector

August-September 2016 October 2016-March 2017 April 2017 Whole survey period
Increase on lowest pay rate
Lowest 25% 1.55% 2.00% 2.00% 2.00%
Median 2.25% 2.20% 2.50% 2.25%
Top 25% 3.00% 2.72% 3.42% 3.00%
Settlements 26 171 75 272
Standard increase
Lowest 25% 1.50% 2.00% 2.00% 2.00%
Median 2.00% 2.00% 2.25% 2.00%
Top 25% 2.90% 2.50% 2.85% 2.60%
Settlements 21 151 64 236
All settlements
Count 28 194 81 303

Table 2c: Pay increases - public sector

August-September 2016 October 2016-March 2017 April 2017 Whole survey period
Increase on lowest pay rate
Lowest 25% 1.00% 2.00% 1.00% 1.00%
Median 1.00% 2.00% 2.14% 2.00%
Top 25% 2.42% 2.27% 3.21% 2.47%
Settlements 31 16 15 62
Standard increase
Lowest 25% 1.00% 1.80% 1.00% 1.00%
Median 1.00% 2.00% 1.00% 1.00%
Top 25% 1.00% 2.05% 1.00% 2.00%
Settlements 21 16 15 52
All settlements
Count 41 19 17 77

Since last August the overall midpoint (median) increase on lowest basic rates has edged up slightly to 2.2% (based on 334 deals, see Table 2). However the “standard increase”, that is, what most grades or workers got, remains still stuck at 2.0% (based on 288 deals).

Some small signs of upward drift can be seen in the table among the middle half of basic pay rises (the “inter-quartile range”). These were worth between 1.75% to 3.0% compared with 1.5% to 2.72% in the 2015-16 pay round. 

Similarly, half of all standard increases were for between 1.5% to 2.5% compared with 1.25% to 2.5% previously. However these are not big changes given the prevailing labour market and economic conditions. 

2% or more

Looking at the data in more detail, a fifth of pay deals added exactly 2.0% to their lowest basic rate and a quarter did so for their general pay rates. Examples range from Expert Logistics (Crewe) to Football Pools (Liverpool) and the Glyndebourne Opera. 

In some cases the 2.0% rise was accompanied by other improvements, or lasts for less than one year. 

The 2% increase under the Scottish Decorators’ Federation agreement (which raised its hourly rate to £11.15) was a short-term deal and a further settlement is due in September 2017. 

The 2% deal at tyre group Michelin (Stoke) was supplemented by the introduction of a possible £5,000 payment for employees diagnosed as terminally ill.

Just over half of the agreements in the survey delivered pay rises of more than 2.0% and that has certainly included some big pay increases. 

Drivers at First Tram Operations saw their salaries rise to £40,000 a year, up 8.52% compared with pre-agreement salaries. 

Cabin crew employed by Virgin Atlantic had a 6.65% increase (4.45% for flight service managers), while “flight pay” went up by an average of 18%. 

East Midlands Airport agreed a single stage 24-month pay deal that delivered a 4.2% increase. 

At Rudolph and Hellmann Automotive, all pay rates increased by 5%. 

A 38p-an-hour rise at IKEA Distribution (Doncaster) was worth 4.8% over 16 months, while workers at engineering firm Cummins Turbo Technologies in Huddersfield received a 3.5% increase. 

Recruitment and retention

Some settlements in the survey could reflect concerns about recruitment, retention and the labour market, even though such trends havve not generally led to higher pay rises. 

The 1% Armed Forces Pay Review Body award included recruitment and retention payments for some staff; the 2.2% RPI-based increase at Network Rail (Maintenance) came with a 29% rise in Inner and Outer London Allowances; and chefs at P&O Crewing Services (Jersey) in the North Sea and Irish Sea Sectors got 2.65% when other staff received 2.3%. 

Where employers directly benchmark against pay rates in the labour market, that can drive pay rates up (although it can have the opposite effect too). 

At Shop Direct (Manchester), the lowest basic rate rose by 11.51% following benchmarking against the market (the standard increase was 2.0%). 

And at Barclays Bank, where negotiations revolved around a 2.5% pay bill increase, new grade minima have been set at 90% of the relevant market medians. 

Long-term deals

Long-term deals should deliver bigger pay increases at a time of rising prices, if they include a link to inflation, and some are. The median basic and standard increase among such deals is 2.6%. 

At engineering firm Babcock Rail, a 2.6% increase was based on the January 2017 RPI figure, with an additional 0.5% underpinned by a minimum £500 for certain grades. 

Out of the 380 pay deals in the survey almost half (46%) are either existing or new long-term deals. However, only a quarter of those had an inflation link, not enough to have a significant effect on the overall trend. Most long term deals in this survey are barely registering any premium over short-term and one-year deals.

Low pay

One in five agreements in the survey were affected by measures designed to boost the pay of the lowest-paid including, but not limited to, agreements affected by statutory minimum wages. The median increase in lowest basic rates rose by almost half a percentage point in April, to 2.42%, coinciding with the latest NLW increase. 

These deals helped to push the overall survey median up to 2.2%. Focussing just on the private and voluntary sector, the median rose from 2.2% to 2.5% in April, and there appeared to be some spill-over to the standard increase, up from 2.0% to 2.25%. In other words, it isn’t only the lowest paid who benefit.

The Scottish-based vegetable firm Kettle Produce implemented a 4.17% increase to £7.50 an hour for staff on the NLW, as did Lunar Freezing (Aberdeen), Bargain Booze Distribution ( 4.3% for drivers’ mates). 

At clothes store Primark in Northern Ireland, the probationary rate is now £7.50 an hour. 

However, measures to help the low paid are not all down to the statutory minimum, negotiators have had their input too. 

Staff who were on £7.20 at the East of England Co-Operative had a 6.1% increase and are now on £7.64 an hour. 

At bus company First South West (Cornwall), a five-month 4.05% increase took the drivers’ rate to £9.50 an hour, with training rates now commencing at £7.50.

The option of using lower age-related rates is available under the statutory NMW and has been taken up by some employers, but not all. The 15-month 2% deal at Joseph Walkers Shortbread removed age-restricted grades. 

In contrast, Argos (Retail) applied a 2% rise to most under-25s in its various geographical zones, whereas workers aged 25+ got between 3% and 6.3% depending on where they work. The company did, however, expand the differential between some of its Team Leaders and their 25years+ colleagues, addressing the risk that pay levels for staff with supervisory responsibilities can be compressed when minimum wages get hiked. 

One other trend, apparently linked to minimum wage changes, has been a number of unusually short pay deals. 

Last September, meat processor Karro Foods (Cookstown) agreed an overall pay increase of 5% for seven months, raising the hourly rate for General Operative (post-2011) to £7.30 - just above the NLW rate applicable at the time – representing an 8.8% increase. However, a new agreement became due from 1 April 2017.

Voluntary Living Wage

Among agreements in our survey, the voluntary Living Wage (LW)/Scottish Living Wage (SLW) and other negotiated measures appear to have been just as influential as increases in the statutory NLW. 

Last November, Sheffield Theatres increased its hourly rate for front of house staff by 14.5% to £8.25 (the LW rate before the latest increase to £8.45 announced by the LWF). Rates for casual crew increased by 21.3% and for wardrobe assistants, LX and sound technicians by 15.7%. 

Other employers whose pay deals were influenced by the voluntary LW range from Arriva Trains Wales (At Seat Catering) to Capita Life and Pensions, Barclays Bank, Legal and General, HSBC and IT group Fujitsu Services. 

Retailers Aldi and Lidl maintained their practice of paying at or above voluntary Living Wage levels (neither negotiate their pay rates with a recognised trade union).

At Insurance group AXA UK, an agreed a paybill increase of 2.7% from 1 April 2017, was to be allocated to individual staff through a “matrix”, but the company also raised its minimum salary to £15,500. 

Crown Paints (non-manual) put its Grade 3 Trainee salary up by 2.61% to £15,410 while other grades got 2%. 

In the Environmental Engineering NJC agreement, the minimum Grade A salary was abolished, leaving only the higher “guide salary” of £14,100 (increasing minimum pay by 5.37% when the general rise was 2.0%. 

To achieve a headline rate of £10 an hour (a 2.51% rise) for drivers at Stagecoach South (Winchester) the pay anniversary date will change to March next year.

Achieving higher minimum wages can come at some cost to other parts of the pay and conditions package. 

Negotiations at online retailer Ocado’s Customer fulfilment centre in Dordon involved the “re-investment” of money from changes to holiday and overtime rates to obtain a 55p an hour increase to basic rates of pay, worth 7.64% on the lowest rate of pay. However, negotiators also secured new “investment” of 4.9%. 

The deal involved consolidation of 2.4 days annual holiday entitlement (equivalent to 1.2%) and switching voluntary overtime from time and a half to time and a quarter (equivalent to 1.5%). However, time and a half will still be paid for certain hours and a 19-month cushion payment protects the small number of employees who could be potentially disadvantaged. 

Public sector

Some public sector pay settlements implemented during the pay round have strayed outside the 1% cap set by the Conservative government in one way or another. The bulk of public sector deals in August-September had a 1% median, but later increases including those implemented this month were worth more, pushing the lowest basic rate median increase to 2.0% (see Table 2). The Local Government NJC for England, Wales and Northern Ireland rolled out increases of up to 3.4% on its lowest pay points, although staff at higher levels got 1% (see page 3).

The voluntary Living Wage played a prominent role in the public sector, where it helped shape pay deals in the NHS, at the British Library, in Public Health England and for Metropolitan Police Staff who get at least the London Living Wage (LLW), currently £9.75 an hour.

Scottish Parliament staff had a 1% rise, but the lowest basic rate rose by 2.42% (along with a commitment to a healthy living scheme and a review of the time it takes to progress through the pay structure). The Scottish government’s commitment to the Scottish Living Wage coupled with a cash underpin of £400 for staff earning less than £22,000 a year contributed to basic pay increases of around 2.4% at a number of bargaining groups. 

The National Assembly for Wales has just applied a 1.25% increase for all staff, uplifting all pay points, following a 1% increase last October. 

The Planning Inspectorate exceeded the 1% cap (slightly) to help with a transition to new pay terms. At the Valuation Office Agency, pay increases were based on benchmarking against civil service equivalent grades, delivering 2.2% on the lowest administrative rate. Skills Development Scotland applied an average increase of 3.9%, including progression, from October. 

At Camden Council in London, a 3.63% pay rise for staff on the NSL parking enforcement contract took the Civil Enforcement Officers’ rate to £10 an hour based on the LLW plus 25p. 

Topping up

A minority of agreements in the survey changed or improved some aspect of their allowances or bonuses, but measures of that kind would not have been widespread enough to make much overall difference to earnings. Examples ranged from improved staff discounts (distribution group Booker and food retailer Greggs) to childrens’ travel passes (Reading Transport) and financial or profit-related bonuses (ferry group Caledonian MacBrayne and specialist information provider Road Transport Media). 

Carillion (Arriva Rail North) introduced the voluntary Living Wage in September 2016, but also improved its overtime rates, night shift premium and on-call rates. 

Industrial action at Tangerine Confectionery York & Pontefract secured a 2% pay increase (under a long-term deal) but also bonus payments based on waste reduction (as well as an extra daily rest break). 

The Charity Commission suspended its progression payments (reducing earnings potential for its staff), but has introduced a Total Reward package including a cycle-to-work scheme, retailer discounts and a house rent deposit loan.

The aerospace group Rolls-Royce Staff National Bargaining agreement secured a 2.45% increase in basic pay but also a group bonus of up to 6.5%. The parties agreed to discuss new arrangements to deliver a cost reduction of 10% from increased productivity, flexibility and standardisation of terms and conditions of employment and working practices.

Tourism organisation Visit Scotland agreed to a review of pay and grading (including progression and journey times) as part of its settlement and there have been commitments to review equal pay at Department for Business, Energy and Industrial Strategy, at the Planning Inspectorate, Skills Development Scotland and through the Higher Education JNC.

Developments of that kind, influenced no doubt by the start of mandatory gender pay gap reporting (see Workplace Report, December 2016) may well yield better pay levels in years to come. But as the General Election approaches, evidence of a renewed squeeze on real earnings for most workers could well become a hot issue. If the TUC slogan “Britain needs a pay rise” hasn’t already been dusted off, it may be shortly.