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One third of UK businesses freeze pay as uncertainty continues

by David Sawers
19 February 2021
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Pay rises have fallen to their lowest level since summer 2020 and pay freezes now represent one-third of all pay awards, latest figures suggest.

According to XpertHR’s latest provisional analysis, published this week, in the three months to the end of January 2021 the median basic pay award is worth 1%.

This compares with a median 2% in the rolling quarter to the end of December 2020. It is also the lowest figure recorded since the three months to the end of August 2020. Pay freezes represent 33.6% of all awards.

Across the whole economy, January is a key month for pay setters, accounting for an estimated quarter of pay settlements.

XpertHR’s research shows:

  • Headline pay award dips: The median basic pay award in the three months to the end of January 2021 is 1%, down from 2% in the previous rolling three-month period.
  • Wide interquartile range: The lower quartile (at or below which the bottom quarter of pay deals lies) stands at nil and the upper quartile at 2%.
  • Majority of pay awards are lower: In a matched sample analysis, 79.5% of pay awards made are lower than the same employee group received in the previous year, 18.1% are at the same level and just 2.4% are higher.
  • The most common pay award is worth 1%: XpertHR’s analysis finds that the most common pay award is worth 1%, followed in second place by pay rises worth 2%.

All of the pay awards recorded by XpertHR in the three months to the end of January 2021 are in the private sector, and it said its 1% headline figure is therefore also representative of the level of private-sector awards over this period. This is just half the 2% recorded in the three months to the end of December 2020 in the private sector.

XpertHR pay and benefits editor Sheila Attwood said the fall in the headline rate of pay awards at the beginning of 2021 reflects the “continuing uncertainty” in which businesses are operating.

She said: “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.”

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