In the three months to April, it said, pay increases have averaged 1.7%, slightly down on the 1.8% reported in the three months to March, but consistent with rises seen since the start of the year. One notable shift in pay trends over the past three months has been the significant increase in the proportion of pay settlements resulting in a pay freeze, which spiked to a 67 month high of 24% in April.
Average pay settlements have been heading lower over the past few years, following averages of 2.5% in 2014 and 2% in 2015, weaker pay settlement in the year to date could be signalling a number of trends. Key among these are the sluggish demand conditions facing a number of manufacturing sectors and some uncertainty running up to the EU referendum, both of which are likely to the leading to more caution in locking in higher pay awards.
The introduction of the National Living Wage in April may also be leaving its mark in our latest pay survey, with companies adjusting individual pay rates to reflect the new rate in place of across the board pay increases, said the EEF.
Lee Hopley, EEF chief economist, said: “The evidence from the two major pay rounds so far this year confirm there is lid on wage inflation and any expectations of an acceleration in pay growth isn’t likely to come from manufacturers this year.
“There are plenty of reasons for companies to be taking a cautious stance on pay deals at the moment, particularly with a more fragile growth outlook and political uncertainty on the horizon. Added to this is the introduction of the National Living Wage, which has potentially prompted a shift in companies’ approach to across the board pay increases. This will be a trend to watch as the NLW rate accelerates out to 2020.”
Other new research from EEF shows that underlying labour conditions in manufacturing have stabilised, with labour turnover rates recovering back to pre-recession levels. See here.
