PAY SETTLEMENTS AND AVERAGE EARNINGS
This outline of pay settlements and average earnings provides a picture of trends across the
economy and comparisons between the public and private sectors. It goes on to look at the
specific trends for major occupations, differing rates across the countries of the UK / English
regions, and draws comparisons for the low and high-paid. Finally, it provides a round-up of
average pay settlements by sector.
1.
Pay settlement trends across economy
Pay settlements across the economy stand at 2%, which is well below the long-run median
of between 3% and 3.5%.
Average pay settlements
2.5
2
2
% increase
2
1.75
1.5
1.1
1
0.5
0
Whole economy
Private
Public
Voluntary
Source: Labour Research Department, settlement sover year to January 2016
A huge gap opened up between private and public sector settlements in 2010 that grew
during 2011 and 2012 when the pay freeze imposed on the public sector was accompanied
by average pay rises of 2.5% in the private sector. Since then, the 1% public sector pay cap
has been running at around half of the average rate in the private sector. Latest figures show
public sector pay settlements at 1.1% over the last year, private sector settlements at 2%
and voluntary sector settlements at 1.75%. Private sector employers expect settlements to
continue at 2% over the year to August 20161 while public sector rates are forecast at 1% to
Autumn 20162. Not-for-profit sector rates are forecast to average 1.8%, while the electricity,
gas and water industry is expected to average 0.8%3 over the year to March 2016.
1
Pay forecasts for the private sector, October 2015, XpertHR
2
CIPD, Labour Market Outlook, Autumn 2015
3
Pay forecasts for the private sector, October 2015, XpertHR
1
2. Average earnings trends across economy
The graph below shows trends in average earnings growth over the last two years. Since
April 2013, private sector earnings growth has been running ahead of the public sector every
month except two. Over the last year, the private sector rate accelerated sharply while the
public sector rate flattened out, until a recent drop-off in private sector rates. In November
2015, the rate across the economy was 2%, private sector growth was 2.2% and average
public sector wages rose by 1.5%.
% change of 3 month average on previous year
Average earnings growth
4.5
4.0
3.5
3.0
2.5
2.0
Whole Economy
Private sector
1.5
Public sector
1.0
0.5
0.0
Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
14 14 14 14 15 15 15 15 15 15 15 15 15 15 15
Month
Source: Office for National Statistics, Labour Market Statistics, January 2016
Forecasts of average earnings predict that growth will stand at 3.4% during 2016 and grow
to 3.9% by 2020 following the pattern shown below4.
4
Office for Budgetary Responsibility, Economic and Fiscal Outlook, November 2015
2
Forecast average earnings growth
4.5
4
% annual growth
3.5
3
2.5
2
1.5
1
0.5
0
2016
2017
2018
2019
2020
Note on difference between pay settlements and average earnings
Before public sector average earnings growth dropped well below the private sector rate in
2013, average earnings were often used as a basis to argue that the public sector continues
to see improvements in pay that are not matched by the private sector and particularly as a
basis for attacking pay progression.
The flaw in these arguments is that the use of average earnings growth for comparisons
does not simply reflect changes due to pay settlements and pay progression.
Changes in the average are affected by a multitude of factors that affect the composition of
the public and private workforce. Any changes that swell the lower paid end of the workforce
and/or reduce the proportion of higher paid employees, such as differences between the
sectors in recruiting staff on part time or zero hours contracts, or redundancies that hit the
most recent recruits hardest, will act as a downward pressure on the average.
The government’s drive toward greater outsourcing in itself tends to lower private sector
average earnings growth and raise public sector growth because of the marked tendency for
outsourcing to focus on lower paid sections of the workforce.
Therefore, average earnings growth does not offer any kind of sound basis for judging actual
changes in the pay packet of a worker in the public or private sector. Pay settlement data
forms a much sounder basis for comparison as it eradicates the differences in workforce
composition that affects average earnings growth comparisons.
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3. Earnings growth by occupation
The Annual Survey of Hours and Earnings (ASHE) provides data that can form useful
comparators for changes in average earnings experienced by UNISON members. The table
below shows the change in median gross annual pay for full-time staff within the main job
categories listed. A listing of earnings growth for more specific jobs within these categories
can be found on the Office for National Statistics website by clicking here
ASHE data on changes in median gross annual pay for full-time employees
Job Type
Annual % change
2014/15
All employees
1.6
Managers, directors and senior officials
1.0
Corporate managers and directors
1.3
Other managers and proprietors
-1.3
Professional occupations
1.0
Science, research, engineering and technology professionals
1.4
Health professionals
-0.3
Teaching and educational professionals
1.0
Business, media and public service professionals
2.4
Associate professional and technical occupations
0.8
Science, engineering and technology associate professionals
0.7
Health and social care associate professionals
-0.8
Protective service occupations
1.0
Culture, media and sports occupations
0.4
Business and public service associate professionals
0.9
Administrative and secretarial occupations
2.2
Administrative occupations
2.5
Secretarial and related occupations
-0.1
Skilled trades occupations
1.5
Skilled agricultural and related trades
0.8
Skilled metal, electrical and electronic trades
0.9
Skilled construction and building trades
1.3
Textiles, printing and other skilled trades
2.3
Caring, leisure and other service occupations
0.2
Caring personal service occupations
-0.1
Leisure, travel and related personal service occupations
1.9
Sales and customer service occupations
2.8
Sales occupations
3.3
Customer service occupations
2.1
4
4. Earnings growth by region
The Annual Survey of Hours Earnings provides a breakdown of earnings growth by region
and local authority can be found at http://www.ons.gov.uk/ons/rel/ashe/annual-survey-ofhours-and-earnings/2015-provisional-results/stb-ashe.html#tab-Regional-earnings
Data on the proportion of employees paid below the living wage is available by parliamentary
constituency at http://visual.ons.gov.uk/how-many-jobs-are-paid-less-than-the-living-wagein-your-area/
For England, a table setting out the cost of housing relative to wages by local authority
district is available at
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/321017/Table
_577.xlsx
5. Earnings of low-paid staff
The adult minimum wage rose to £6.70 an hour in October 2015 and in November 2015 the
Living Wage Foundation announced that new “living wage” rates of £9.40 an hour in London
and £8.25 an hour across the rest of the UK (accredited Living Wage employers have until
next April to implement this rate).
The Living Wage has become a standard benchmark for the minimum needed for low-paid
staff to have a “basic but acceptable” standard of living.
There are now approaching 2,000 employers accredited as living wage employers by the
Living Wage Foundation, including some of the largest private companies in the UK, such as
Barclays, HSBC, IKEA and Lidl. Over a quarter of the FTSE 100 companies are now
accredited.
Across the public sector, there have been widespread agreements to introduce the living
wage:

The Scotland government has established the living wage within all its public sector
organisations

Minimum rates have been raised to the living wage or above in the most recent pay
settlements for staff at:
 Wales NHS,
 higher education sector
 police staff in England and Wales

Framework agreements for support staff in more than 12,000 schools across the UK
set the living wage as a key target
Even where the living wage has not been achieved, pay deals have delivered considerably
higher than average rises for the lowest paid staff. For local government employees on NJC
terms and conditions, the 2015 pay agreement resulted an a 8.6% rise for the lowest paid
staff and among staff on Agenda for Change terms and conditions in NHS England the 2015
deal led to a 5.6% increase.
Furthermore, even where national agreements have not achieved a living wage settlement, a
major proportion of individual councils, NHS trusts, schools and academies have taken up
5
the living wage on their own initiative. A UNISON Freedom of Information survey covering
local government, the NHS, universities, further education colleges and police authorities
that drew over 900 responses found that 51% of employers across these sectors already
pay at least the living wage to their lowest paid staff.
Though not directly classified as public sector, a Guardian survey in June 2015 also
revealed that two thirds of housing associations pay the living wage, with a third accredited
by the Living Wage Foundation and a third paying the wage without official accreditation.
Only a minority of employers that adopt the Living Wage have gone down the route of
seeking official accreditation as a living wage employer. However, there are now 39 councils
accredited as living wage employers by the Living Wage Foundation, along with nine trusts
and 34 acadamies / schools.
“National living wage”
In July 2015, the government announced in its emergency budget that it will introduce a
“national living wage” from April 2016 for workers aged 25 or over. In reality this “living
wage” is simply a relabelling of the national minimum wage and raising of the rate for a
section of the UK workforce.
The rate to come into force in 2016 will be £7.20 an hour and the government has set out
the expectation that the rate will rise to 60% of median earnings by 2020. The Office for
Budgetary Responsibility (OBR) has estimated that this will lead to a rate of £9.30 an
hour5 by 2020. If this forecast turns out to be correct and the Low Pay Commission
follows a straight path to the 2020 target, the OBR predicts that the National Minimum
Wage for workers aged 25 or over will unfold as follows:
Hourly rate
5
2016
2017
2018
2019
2020
£7.20
£7.65
£8.20
£8.70
£9.30
Office for Budgetary Responsibility, Economic and Fiscal Outlook, November 2015
6
If you are faced with an employer who argues that the government is set to introduce a
“national living wage” from April 2016 for workers aged over 24 and therefore there is no
need for the employer to adopt the Living Wage set out by the Living Wage Foundation, the
following points set out why that argument is wrong:




The national minimum wage that has been relabelled by the government as the
“national living wage” is a figure that has not been worked out on a rigorous basis
related to the actual cost of living. Over time it is set to move toward a target rate set
at 60% of average earnings, which is a valuable benchmark for reducing inequality in
the workplace.
However, the reason the UK wide and the London living wages are better measures
of the real wage needed to achieve a decent standard of living is that they take
account of changes in prices, whereas the cost of living has no direct role in the
government’s “living wage.”
For example, the Greater London Authority works out the London living wage by
calculating the wage needed to achieve a “low cost but acceptable standard of living”
for a range of typical families and then it averages the result against the figure
advanced by the government based on 60% of average earnings.
Loughborough University works out the UK living wage by gathering public views of
the items needed for a minimum but acceptable standard of living, costing those
items and adding relevant current rates for rent, council tax and childcare. It then
ensures that rises don’t act as an excessive burden on organisations by capping any
increase at 2% above changes in average earnings.
In short, the government’s “living wage” acts as a welcome limit on wage inequality, but it
doesn’t ensure that an organisation’s lowest paid staff can afford a decent standard of living.
Only the UK and London living wages announced by the Living Wage Foundation fulfil that
role.
Welfare cuts
Changes to minimum wage rates have to be seen in the context of the July 2015 budget,
which announced cuts to welfare benefits valued at £12 billion.
Analysis by the Institute for Fiscal Studies6 of the net impact of the changes makes the key
observation below:
“Among the 8.4 million working age households who are currently eligible for benefits
or tax credits who do contain someone in paid work the average loss from the cuts to
benefits and tax credits is £750 per year. Among this same group the average gain
from the new NLW, is estimated at £200 per year (in a “better case” scenario). This
suggests that those in paid work and eligible for benefits or tax credits are, on
average, being compensated for 26% of their losses from changes to taxes, tax
credits and benefits through the new NLW.”
6
Institute for Fiscal Studies, An assessment of the potential compensation provided by the new ‘National
Living Wage’ for the personal tax and benefit measures announced for implementation in the current
parliament, September 2015
7
In addition, research commissioned by the TUC using the IPPR tax-benefit model looked at
the combined effect of the budget from changes to Universal Credit work allowance, the
benefit freeze, minimum wage, personal income tax allowance and higher rate income tax
threshold.7
This analysis found that the net results will be a fall in the annual income of the poorest 40%
of working households. Between 2015/16 and 2020/21, the average loss for the poorest
20% of working households will be £460 a year.
6. Comparisons of pay cap against wider economy
The graphs below put the public sector pay cap in the context of developments across the
wider economy. While the average value of public sector pay rises over the last five years
has been 3.4%, the value of the economy has increased by over 12%, the cost of living has
risen by almost 20%, the pay of chief executives for the UK’s largest companies has grown
by over 20% and company profits have jumped by 28%.
Growth rate
How does public sector pay compare over the
last five years
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
Pay rise since
2010*
Value of economy Cost of living*** Top bosses' pay Company profits
**
****
*****
Sources:
* Based on median public sector pay rise of 0.4% in 2010 (Incomes Data Services), followed by pay freezes in 2011 and 2012, then 1% pay
cap in 2013,2014 and 2015
** Based on growth in gross domestic product between Q1 2010 and Q3 2015 from Office for National Statistics, Preliminary Estimate of
GDP, Quarter Q3 (July to September) 2015
*** Based on Retail Prices Index between January 2010 and December 2015, taken from Office for National Statistics, Consumer Price
Inflation, December 2015
**** Based on growth in average FTSE 100 chief executive pay between 2010 and 2014 from High Pay Centre, The State of Pay, August 2015
***** Based on corporations' operating surpluses between Q1 2010 and Q3 2015 from Office for National Statistics, Quarterly National
Accounts, Quarter 3 (July - September) 2015
When examining the outlook over the next four years, during which time the pay cap is set to
remain in force, the average increase in the value of the economy is set to run at 2.4%, the
cost of living is due to grow at 3% a year and average earnings growth is expected to
average 3.7%.
7
TUC, July Budget 2015 Reforms – Impact on households, September 2015
8
How does the pay cap compare to forecasts for
next few years?
4
3
2
1
0
Pay cap
Value of economy*
Cost of living **
Average wages***
Sources:
* Based on average annual gross domestic product forecast between 2016 and 2020 from Office for Budgetary Responsibility, Economic and
Fiscal Outlook, November 2015
** Based on average annual growth in Retail Prices Index forecast between 2016 and 2019 from HM Treasury, Forecasts for the UK
Economy, November 2015
*** Based on average annual earnings growth forecast between 2016 and 2020 from Office for Budgetary Responsibility, Economic and
Fiscal Outlook, November 2015
7. Latest pay settlements
Average pay settlements by sector
Sector
Average reported pay settlements
Across economy
2.0%
Private sector
2.0%
Public sector
1.1%
Not for profit
1.75%
Energy & gas
1.5%
Water & waste management
1.8%
Retail & wholesale
2.3%
Transportation & storage
Admin & support services
Security
2.0%
2.0%
2.0%
Source: Labour Research Department, based on reported settlements in sector over last year
If you require greater detail on pay settlements for particular sectors, contact the Bargaining
Support Group on bsg@unison.co.uk
9
Most recent pay rises among some of UNISON’s largest bargaining groups
Bargaining Group
Most recent pay settlement
Local Government Services
NJC (England, Wales &
Northern Ireland)
BASIC: 2.2% from Jan 15 for staff above SCPs 10 and non-consolidated
payments ranging £325 to £100
EXCEPTION: Rises ranging from 8.56% to 2.32% for SCPs 5-10
Scottish Joint Council for
Local Government
Employees
BASIC: 1.5% from Apr 15 – Mar 16, 1% from Apr 16 – Mar 17
EXCEPTION: Bottom points raised to Living Wage
ENGLAND: BASIC 1% from April 2015 for all except top pay band /
EXCEPTION: Bottom rate lifted to £15,100
Health - Agenda for Change
staff
SCOTLAND: BASIC: 1% from April 2015 / EXCEPTION: Bottom point
raised to Living Wage
WALES: BASIC: £187 non consolidated from December 2014 and 1%
from April 2015 / EXCEPTION: Bottom point raised to Living Wage
NORTHERN IRELAND: 1% for those on top of band from April 2015
ENGLAND: 1% from August 2014 and bottom point raised to Living Wage
Further Education
SCOTLAND: 1% or £300, whichever is the greater, from April 2015 All
directly employed staff receive at least Living Wage.
WALES; 1% from August 2015
BASIC: 1% from August 2015 on all points above SCP9
Higher Education
EXCEPTION: Bottom point raised to Living Wage for staff on 35 hour
week and tapering ranging between 1.1% and 2.6% for bottom eight
points
BASIC: 0.9% increase from September 2015
Sixth Form Colleges
(England)
EXCEPTION: Additional increases for the lowest paid which increased
the value of the offer to 1% of paybill
Police Staff (England &
Wales)
2.2% or £400 (whichever is the greater) from 1 March 2015 to
31 August 2016
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