Pay analysts XpertHR research - based on a sample of 100 pay awards - found that in the three months to January the median basic pay rise in the private sector was just 1 per cent, compared to 2 per cent in the three months to December. This is the lowest it has been since the summer of 2020 - when it was zero.
January normally accounts for just under a quarter of pay settlements each year, but activity was slow this year as employers remain concerned about the pandemic and uncertainty over Brexit.
The research found that the same pay was awarded to 18.1 per cent of employees, with just 2.4 per cent receiving a higher amount - and all the pay awards recorded by XpertHR in the three months to the end of January 2021 were in the private sector.
David Spencer - Professor of Economics and Political Economy at Leeds University Business School - said:
“A big factor holding back pay rises is the higher level of unemployment and more generally, job insecurity. Workers have little bargaining power to push for higher wages, while firms are unable or reluctant to raise wages due to weak sales and uncertainty about the length of the lockdown. If the economy bounces back later in the year, pressure might be felt for wage rises. But if, as seems likely, unemployment grows, then wages will remain sluggish.”
He also suggested that - compared to the high levels of unemployment linked to the coronavirus restrictions - for most employers, Brexit was a relatively minor factor.
Sheila Attwood - XpertHR Pay and Benefits Editor - said:
"The fall in the headline rate of pay awards at the beginning of 2021 reflects the continuing uncertainty in which businesses are operating. The number of organisations choosing to freeze pay rather than make any increase is discouraging, but for many this decision would not have been taken lightly on the back of the effort many employees have put in over the past year."
Sarah Arnold - Senior Economist at the New Economics Foundation - stated that it was not surprising that employers are freezing wages in response to economic uncertainty.
She added:
“This highlights the need for a bold and ambitious recovery plan from the government to help those hardest hit and keep the economy moving."
Frances O’Grady - General Secretary of the TUC - called on the government to do more to protect pay growth.
She warned:
“Businesses need to know that furlough support will remain available until at least the end of the year, so they can have the confidence to press ahead with pay rises. And the chancellor must use the Budget to cancel the public sector pay freeze and make sure every key worker gets a pay rise.”
