Private sector employers are coming under increasing pressure to offer inflation-busting pay rises to staff as the economy picks up, new figures have shown.
However, one in 10 companies are still pushing through pay freezes and the typical pay rise in the private sector was 2pc in the three months to May, the latest analysis by Income Data Services (IDS) has revealed.
Ken Mulkearn, editor of the IDS pay report, said that retail price inflation, running at 5.1pc, was beginning to influence pay deals in companies that were seeing sales growth and would continue to push up pay rises for the remainder of the year, provided the economy remained stable.
He said: “Inflation is having a modest upward pressure on pay deals. In companies where they have turned around lately and order books are beginning to be filled again, the cost of living is a factor. It will carry more weight as long as the economy grows.”
Manufacturing firms were beginning to return to pay rises in the region of 3pc to 4pc this year, Mr Mulkearn said. Cigarette maker Imperial Tobacco awarded its 1,580 production workers and staff a 4.9pc pay rise from May 2010, just below the RPI rate but significantly above the consumer prices index, the rate which is used by the Bank of England for its 2pc target and which now stands at 3.4pc.
A further fifth of companies – particularly in chemicals, transport and utilities – awarded 3pc pay rises and above, the survey of 127 organisations, covering 2.2m employees showed.
The majority of public workers were also awarded a pay rise in the three months to May, with just two-fifths of public sector employers imposing pay freezes. Mr Mulkearn said this was largely due to teachers, police and NHS staff being locked into multiyear pay deals of at least 2pc, agreed prior to the recession.
The typical pay award for public sector staff fell to 0.8pc in the latest study, down from 1pc in the three months to April, and less than half the 2pc rise reported for the economy as whole.
Mr Mulkearn said: “The public sector freeze has already begun and there is every prospect that some groups, such as local authority staff in England and Wales, will face a three-year pay freeze.”
However, public sector workers understood the need for pay restraint to save jobs, he said.
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