Pay Awards Subdued As Bosses Boosted

The latest analysis of pay settlements shows that the majority of employers continue to award pay increases between 2 and 3% while Britain's top bosses saw their total earnings rise by more than 50% over the year to June.

That's according to the latest Directors' Pay Report that showed salary rises were not high but bonuses soared.

While pay for company board members went up 45% as a whole that for chief executives climbed to 55%.

The report from the Incomes Data Services (IDS) indicates a dramatic reversal in fortunes over the year.

Although basic salary rises appeared to be subdued, growing at an average of just 3.6%, overall, for the FTSE 100 chief executives, pay packages were actually boosted by the reappearance of bonus payments, share option gains and separate long-term incentive plans.

That's according to the website IDSPay.co.uk who said the median (average) pay settlement in the three months to the end of September is holding steady 2%, broadly in line with the latest average earnings figures on regular pay growth.

Meanwhile, the proportion of pay freezes remains relatively low. The latest analysis is based on 69 pay settlements effective in the three months to the end of September, covering 1,446,445 employees in total.

The proportion of freezes on basic pay remains relatively low at around 19%, and in some of these cases other elements of pay, such as bonuses or progression, have continued to be paid.

The latest analysis of pay settlements is largely focussed on the private sector, with only one-in-six deals in the public sector. The largest number of private sector awards (34) are in services, and the median pay award here is 2.2% also in line with the National Minimum Wage uplift, reflecting the fact that around a third of these deals are in retail, where many employers have awarded increases at exactly this level.

Around a third of all deals recorded in the latest three-month period are in manufacturing, and the median here is slightly lower, at 2%.

The public sector settlements recorded so far in 2010 have predominantly been under the final stages of long-term deals, agreed well before the announcement of the public sector pay freeze.

In the latest three-month period, these include a 2.3% increase for schoolteachers in England and Wales, and a 2.55% increase for police officers, both in the last year of long-term deals.

The median for the public sector is similar at 2%, but this is likely to come down as the groups covered by the pay freeze policy this year are included in the analysis.

For example, a number of civil service groups are in negotiations over pay reviews. These are likely to result in freezes for staff earning above £21,000 and flat rate increases of at least £250 for those below, in line with Government policy.

Ken Mulkearn, Editor of IDS Pay Report, whose staff collect and analyse the pay settlement data for www.incomesdata.co.uk, said: "The modest loosening of pay policies that we have seen across the private sector during 2010 continues.

"The level of settlements reflects the broad recovery in profitability, and higher inflation to some extent as well. If these indicators remain on track, in 2011 we might see 3% emerge as the central figure for pay budgets.

"However affordability still weighs heavily in the balance, and the outlook for both the economy and the labour market is key. In line with this, reward managers as well as economists will be watching closely to see whether the recent spending review has any wider effects."

(BMcN/BMcC)