Pay settlements return to pre-recession levels

Posted on 31 May 2012

Pay settlements have risen, returning to the normal long term average last seen before the 2008/9 recession, according to research by EEF and JAM Recruitment.

The average pay settlement for the period was 2.8%, up from 2.6% for the previous three months to the end of March.

Almost 200 companies were surveyed on pay scales for the three months to the end of April by the manufacturers organisation EEF with recruitment agency JAM.

The last time the average settlement was at this level was in November 2008, having touched a three month low of just 0.4% towards the end of 2009.

The data also shows that pay freezes are remaining constant at just under 1 in 10 settlements, while deferred settlements have fallen to just over 4% of the total. Four fifths of settlements are at or below 3%.

The results indicate how internal costs have risen compared with turnover.

“The fact it has taken the best part of four years for pay settlements to get back to even the long term average shows the extreme pressure that companies have been under to control their internal costs,” said Lee Hopley, EEF’s chief economist. “There is little doubt that the economic realism amongst both employers and employees during this period has helped in no small measure to maintain employment and skills that might otherwise have been lost.”

John Morris, chief executive of JAM Recruitment, said: “The market is consistently strong but the fact we’re still seeing skills shortages means employers are continually having to review the attractiveness of the packages they’re offering in order to attract, and keep, the talent they need.”

3.01-4.0022 (8 at 4% exactly)

Settlement level – per cent Number of settlements
Pay reduction, 0
Zero (pay freeze) 18
0.01-2.00 36 (1 at 1% exactly and 28 at 2% exactly)
2.01-3.00 101 (51 at 3% exactly)
4.01 or more 14