Workplace Report May 2022

Features

The state of pay

Pay is very much in the headlines, but what has actually happened in union-organised sectors of the labour market over the last nine months? Workplace Report reviews the outcomes so far in the 2021-22 pay round


Who could have predicted last summer that, by this spring, negotiators would be chasing retail prices index (RPI) inflation of 9% or more? Labour shortages, the rising cost of living and hard bargaining have seen some big individual pay rises, but living standards are still being squeezed. 


No-one seems to be certain when these inflation pressures (which pre-date the war in Ukraine) might start to ease off. For one thing, more energy price rises are imminent. Together with last month’s National Insurance increase, pressure on household budgets is ramping up, so getting a negotiated pay rise is an even bigger deal this year than usual. 


As we report on pages 4 and 5, and have reported in previous issues (including the January issue) there are significant levels of industrial action taking place or planned, as unions attempt to protect members from the squeeze.


To get a handle on what’s really happening on pay, we’re taking stock of 495 pay settlements implemented since August 2021 – what we would normally regard as the start of the 2021-22 pay round. In most cases (451) we were able to calculate the percentage increase on the lowest basic rate of pay or salary, or the increase for most workers (the standard increase) – or both.


Overview

Since the pay round began last August, half of all pay deals monitored through LRD’s Payline have been worth 2.75% or more for most workers covered (referred to as the standard increase). That “median” increase on lowest basic rates was 3.2%. 


Pay-round standard increase


• lower quartile 1.45%, median 2.75%, upper quartile 4.8%;


• overall pay freezes: 16% of agreements;


• standard pay rises of at least 9% (the March RPI level): 6% of agreements; and


• data: based on standard increases in 409 out of 495 agreements.


Pay-round lowest basic increase


• lower quartile 2.0%, median 3.18%, upper quartile 5.4%;


• lowest-basic freezes: 7% of agreements;


• lowest basic rises of at least 9%: 9% of agreements; and


• data: based on lowest basic increases in 424 out of 495 agreements.


If these pay-round figures seem low, there is a reason: with the cost of living rising as quickly as it has been, pay decisions are being made by the month, if not by the week. When the pay round started, the most recently-available annual inflation figure was 3.8% (July RPI). It had risen steadily from just 1.4% in January 2021, and more was expected, but how fast and how far the cost of living would rise was hard to predict.


As the chart below shows, the answer proved to be “fast and far”. By March 2022, RPI inflation hit 9%. By the government’s preferred CPI measure, it reached 7%. And on the ONS measure of CPI including a housing element (CPIH), it was 6.2%. In this environment, even deals with a specific link to inflation “built in” were being overtaken (see box). 


From a low base of between 1% and 2% at the end of the summer, the median value of pay settlements rose in the autumn, with standard increases ranged around 4.5% to 4.8%. However, with much bigger numbers of settlements involved, we have seen medians of 3% in January and around 4% in April. Some examples from these different phases of the pay round are given below. 


There are some important qualifications to be made about all these figures:


provisional: these are provisional figures, especially for April, as more data will continue to be received; 


unweighted: none of these figures are weighted to take account of the different number of workers covered by different agreements;


monthly: we are mainly quoting single-month figures, unlike the three-monthly medians published on page 2 of Workplace Report where the trend in settlements is “smoothed out”; 


uneven: in some months – particularly November, December, February and March – there are only relatively small numbers of deals involved; and


composition: different industry groups contribute to varying degrees in any particular month (see the table on page 16). This affects the outcome:


• public sector deals dominated the results in August, especially from education and public administration;


• manufacturing and construction deals were mainly concentrated in January;


• deals in energy, water and waste took effect mainly in April;


• service industries (a diverse group) played a big role both in January and April; and


• transport settlements played an important role in each of the nine months. 


Analysis by month

By using a month by month analysis, we have been able to compare settlements with the inflation rate prevailing for that month (apart from April, where the inflation rate is not yet known). 


Standard increases

• 11% of deals (36 out of 335) matched or beat RPI inflation for the relevant month with their standard pay increase.


Lowest basic increases


• 15% were able to raise their lowest basic rate by the same or more than prevailing RPI inflation.


A monthly analysis also shows how much easier it would be for the government to say pay is keeping up with inflation, if its plan to align RPI with CPIH was implemented (the policy is currently due for judicial review). Using CPIH as the benchmark, instead of RPI: 


Standard increases (compared with CPIH)


• 29% of settlements would appear to match or beat CPIH.


Lowest basic increases (compared with CPIH)


• 35% of settlements would appear to match or beat CPIH.


RPI-beating deals


Based on a month by month analysis, the greatest number of RPI-beating deals in our survey have been in the transport and storage sector. One example is Transport for Wales Rail Limited (Cleaning Services) – previously Axis Cleaning Services, brought in-house in early 2021. 


A new cleaning pay structure negotiated with the RMT union resulted in rises ranging from 4.2% to 17.9%, when RPI inflation was 7.1% (November 2021). Band 6B (competent and agile cleaning within a customer environment), covering 54% of staff, rose to £10.50ph, a 10.5% increase. 


But there were examples outside transport. UNISON’s agreement with housing provider Anchor Hanover saw an uplift to the voluntary Real Living Wage of £9.90ph for all care workers and other hourly paid staff – for those previously paid the statutory National Living Wage of £8.91ph (from last month it rose to £9.50) that represented an 11.1% increase when RPI inflation stood at 7.5%.


And when the Scottish government announced it would fund frontline social care at £10.02ph from 1 December 2021, Enable Scotland was able to re-visit its pay rates. Together with UNISON, it agreed an additional 4% increase that took the basic rate of pay for frontline staff to £10.40ph, taking the total increase under its October 2021 deal to 9.3% at a time when RPI inflation was running at 7.5%.


Plastic product manufacturer PorvairSciences agreed a 9% increase from 1 January 2022, in a month when RPI inflation reached 7.8%. The Unite-negotiated deal came with a £250 one-off lump sum. Thwaites (which manufactures lifting and handling equipment) agreed a 5.25% increase from 1 September 2021 when RPI was rising by 4.9%; and Riverside Bakery (Addo Food Group) agreed increases worth 7% backdated to 1 October 2021, when RPI inflation was 6%.


Timing

The 2021-22 pay round will continue to be affected by the results of last year’s public sector pay freeze, which affected overall pay outcomes in August and September. UK central government policy was to freeze pay for the majority of staff with a consolidated £250 only for those earning less than £24,000. 


Implementation varied. The Joint Nature Conservation Committee (JNCC), for example, included a non-consolidated, performance-related bonus of approximately £375 for all staff in post on 31 March 2022 with at least six months’ service and a “good” performance rating. 


And there were exceptions. The Ministry of Justice was in the midst of a three year pay agreement which involved a 2.79% paybill increase from 1 August 2021 (while standardising weekly hours at 37). 


The Northern Ireland Civil Service saw a 1% increase to pay points, with a one-step progression increase for all eligible satisfactory performers; a 3% non-consolidated, non-pensionable payment for administrative assistants and analogous staff; and a commitment to become a Living Wage Foundation employer.


BBC staff had an across the board 1% increase for all staff, while those in the bottom quartile of their pay band received a further 1.5% (staff in the second from bottom quartile received a further 0.5%). In September, police bargaining groups were affected by the freeze policy, as were schoolteachers in England. 


College staff were affected by the Association of Colleges (AoC) recommendation for an increase of 1% or £250, whichever was the greater (although some got more through local agreements); and there was an across-the-board increase of 1.75% for Further Education Wales


Employers in the Higher Education JNCHES agreement imposed a 1.5% increase for pay points 22 and above, with higher increases ranging from 1.54% up to 3.6% for pay points 21 and below (widespread industrial action over pay, pensions and working conditions followed). 


As autumn drifted into winter inflation continued to go up and the balance of settlements shifted towards the private sector, with pay medians rising to around 5%. At Booker Retail Partners (Hemel Hempstead) for example, warehouse and clerical staff received an additional 26 pence per hour, taking their basic rate to £12 (2.2%, contributing to a total increase of 7.2%) on the successful completion of a pay ballot.


Hovertravel entered into a 16 month agreement, following a benchmarking exercise, with increases ranging from 6.5% to 9.3%, depending on role (8.2% for the lowest paid operations HAS (L1) grade). Moto Hospitality agreed a paybill increase of 7% from 5 December 2021, bringing forward the April 2022 pay agreement (as a thank you to staff for working through the pandemic).


Care workers, domestic and maintenance staff at Sage Nursing Home were boosted onto the London Living Wage (£11.05ph) giving a minimum increase of 11% (all other staff got 5%). Accenture Learning provided increases of up to 10.44% for their lowest paid staff; while Stagecoach Cambus provided a 5.4% increase at its Cambridge & Fenstanton operation (taking the hourly rate to £13ph) and 9% at Peterborough (taking the hourly rate to £12ph).


With the arrival of the new year in January, inflation continued to rise, but settlement medians dropped back, suggesting that negotiators were “hitting the buffers” to some degree. Bargaining groups contributing to that trend included manufacturing employers, with standard increases ranging from 1.5% at Safran Landing Systems to 3.0% at Twinings, 5.4% at Forterra (Bricks) and 7% at Nairns Oatcakes. 


In construction a number of national agreements settled at around 2.5%, like the Engineering Construction (NAECI) NJC. The busy transport bargaining sector saw everything from pay freezes at EasyJet and AirFrance to 6% at Menzies Aviation (Heathrow) Joint Venture (for refuelling workers) and 14% at DHL (City Plumbing) Warrington. In services, the ITV settlement was 3%. 


Pay trends appeared to be strengthening in April, although not enough to catch RPI, CPI or CPIH inflation. Middle of the range manufacturing pay rises included 4.5% at Panasonic. There were 15 settlements in energy, water and waste, ranging from 2% at Serco (Derbyshire Dales District Council) to 4.8% at Dwr Cymru/Welsh Water, and 8.2% at First Hydro (but with a freeze at British Gas Services (Customer Operations)). 


The big Asda retail pay settlement came in at 3.25%, while the bulk of transport and services settlements delivered a very wide range of pay increases. The variety in deals now being done suggests that there is scope, at employer level at least, to respond to very high inflation in creative ways. 


Health and local government settlements awaited


Pay settlements due in April in the health service and local government are not included in this survey as they have not yet been settled: 


NHS: The UK government was late in submitting evidence to the NHS Pay Review Body and an announcement is not expected until early summer. Because of last month’s rise in the statutory National Living Wage, an “advance of the 2022/23 pay award” has been paid to staff on the spot salary of band 1 and the entry point of band 2 (£9.49 in England), increasing the rate by around 1.7% to £9.65. In Scotland, the Scottish Terms & Conditions Committee (STAC) staff side submitted its pay claim to the Scottish government in March.


Local authorities: The 2021 pay award for England, Wales and Northern Ireland (1.75% on pay points 2 and above, 2.75% on pay point 1) was only recently settled, and a claim for 2022 had not been submitted as Workplace Report went to press (see page 3). While UNISON and GMB reluctantly accepted the deal, Unite said it would be taking industrial action in councils where enough members rejected the deal, and strikes have taken place in Northern Ireland (see page 4). In Scotland a separate pay offer of 2% on all spinal column points and an increase in the Scottish Local Government Living Wage (SLGLW) to £9.98 was rejected by unions. Employers’ leaders were due to meet again on 29 April. 


Settlements (number) Private/public sector split (number)Standard median (%)Lowest basic median (%)Manufacturing etc (number)Energy & Water (number)Construction (number)Sales (number)Transport etc (number)Services (number)Public admin & health (number)Education (number)Aug to Apr495342/1532.83.291211424135764985Aug 10219/831.01.45111883444Sep 3619/172.02.0826515Oct5640/164.84.8712432622Nov1919/04.85.221115Dec 2316/74.57.27925Jan120103/173.03.0434962814214Feb 1615/14.55.4311011Mar2019/12.53.321376Apr10392/114.04.2211516262743

Notes: the table shows unweighted percentage increases and the number of deals monitored for the survey, where in most cases the standard and lowest-basic pay increase awarded were known. “Manufacturing etc” includes some offshore and petrochemical agreements. “Sales” includes wholesale, retail and motor repair. “Transport etc” includes storage and postal services. “Services” includes accommodation, information, finance, real estate, professional and administrative services, arts and entertainment, and other services.

Inflation-linked deals struggle to keep up


Pay deals with a “built-in” inflation link have struggled to keep up with the rapid rate at which the cost of living has been rising. Even so, high inflation has not entirely killed-off negotiators’ willingness to enter into new long-term deals, or supplement existing ones where necessary.


Old Bushmills Distillery (Casa Cuervo) had a 3.8% increase from 1 August 2021 based on the May 2021 RPI (3.3%) plus 0.5% (in the first year of a three stage three year agreement) but by August RPI inflation had risen to 4.8%. Similarly, pay settlements for the Caledonian MacBrayne ferry workforce provided rises of 4.8% in October based on the August RPI rate, but by October RPI inflation had risen to 6.0%.


But labour shortages trumped a pre-agreed RPI link at Carntyne Transport, where there was a 19% increase to basic rates from 27 January 2022. The second stage of a two stage, two year agreement had been due to apply an RPI-based increase, capped at 3%, from 1 April 2022, but, in response to increased wages throughout the sector, the basic rate was uplifted from £12.60ph to £15ph, from the earlier date. In addition, the premium rate for hours worked over nine in any given day rose from £12.60ph to £17ph.


Other inflation-linked deals came with added benefits – potentially helpful for recruitment and retention. At DHL Wellham Green the second year of a two stage, two year agreement delivered an increase of 8.2% on basic pay and shift premiums from 1 April (based on the RPI for February 2022). But it also provides for the final 15 minute break of the day to be paid; increased sick pay from 75% to 100% of basic pay with two waiting days; and increased overtime premia from 1.15 times to 1.25 times the basic rate (rising to 1.35 times from 1 October 2022).


Among these agreements it remained less common to see pay being explicitly linked to the usually-lower CPI measure of inflation, rather than RPI. However, some hybrid schemes tried to bridge the difference. Anglo Beef Processors UK was one example, with a 7.2% deal based on the average of CPI and RPI as at 1 April 2022 (6.2% and 8.2% respectively).