Average pay deals have remained “stable” in recent months, although settlements in manufacturing firms are increasing in the wake of rising inflation, according to a new study.
Average awards remained at 2.4% in the final few months of 2010, but more than a third of increases in manufacturing were worth 4% or more, said pay analysts IDS.
An early look at deals in January showed higher pay rises, with just two of 25 awards monitored worth less than 2%.
“Inflation looks set to increase further in the coming months as the VAT rise which took effect at the start of the year comes into the inflation figures, and this could be further fuelled by continued increases in oil prices,” the report said.
“With increased media focus on inflation and pay, employees are more aware than ever of the gap between pay settlement levels and RPI, and are likely to put pressure on union negotiators to make up some of this ground in pay negotiations.
“As well as higher inflation, 2011 pay negotiations are taking place against a backdrop of generally increasing profitability, though the post-recession context and concerns over the impact of public spending cuts will keep affordability concerns centre stage.”
Ken Mulkearn, of IDS, said: “The squeeze in incomes resulting from the sharp rise in inflation means that in many parts of the private sector, employees are looking for wage rises to compensate them for cuts in real take-home pay.
“Our latest figures show evidence of this in manufacturing in particular. Pay growth is more subdued in other parts of the private sector, but the pressures could be reflected in bonus payments over the coming months.
“It’s a very different picture for the public sector, where a two-year pay freeze is taking hold against a backdrop of startling job cuts.”
In the year to December, RPI inflation was 4.8%, up from 4.7% in November, while CPI inflation – the Government’s target measure – increased from 3.3% to 3.7%.