Public-sector pay awards rise but overall levels below what has been seen so far this year

The latest data from XpertHR shows that the median basic pay award in the three months to the end of September 2023 was 5.4%, slightly up from the 5% recorded in the previous rolling quarter, but below the 6% median that settlements have stood for the majority of the year so far.

Meanwhile, in its bi-annual pay award forecast, XpertHR estimates the median pay award for the 12 months to the end of September 2024 will stand at 5%, one percentage point lower than over the previous year.

 Latest rolling quarter findings: 

Based on the outcome of 66 pay awards with effective dates between 1 July and 30 September 2023, representing close to one million employees, XpertHR also found that:

• Three-quarters of settlements higher than last year. 74.5% of deals were worth more than was awarded in the 2022 settlement. Around one in 10 (9.1%) were worth the same, whilst the remaining 16.4% were lower.
• Most common deal is 5%. More than a quarter (27.1%) of settlements were worth 5%, and a further 14.6% of awards were 6%.
• Merit budget closely aligned to basic awards. The median merit budget set was 5%, close in value to the median basic award. One-third (33.3%) of deals in the three-month period were merit.

Measures of inflation are beginning to show a downward trend, which is reflected in pay settlement values being lower now than they were earlier in the year.

Private and public sector pay parity: 

Public-sector pay awards are at 6.1% over the past year, the highest level recorded since 1992. Interestingly, the private sector’s median award for the 12 months to September 2023 was 6%, indicating little difference between public and private sector pay trends. Pay awards have risen by roughly 50% over the past year, up from 4% in the year to September 2022 for both sectors, reflecting widespread increases across the economy. In the period from 1 July to 30 September 2023, two notable public sector deals were completed – schoolteachers in England received a 6.5% pay rise, benefiting around 200,000 local authority maintained school employees, and police officers in England and Wales were granted a 7% consolidated increase, affecting approximately 150,000 individuals.

Forecasts for pay awards in 2023/2024:

After a year marked by the highest pay settlements in over three decades, XpertHR data shows anticipated changes in pay awards for the next 12 months. This analysis draws from responses received from 201 organisations, collectively representing 587,623 UK employees. XpertHR found:

• Median pay awards dips. The median pay award for the 12 months ending September 2023 was 6%. Projections for the upcoming year indicate a slightly lower median of 5%.
• Reduced award range. The expected interquartile range narrows to just one percentage point, with a lower quartile at 4% and an upper quartile at 5%. This compares to the preceding year, where the range spanned three percentage points, suggesting more consistent awards across employee groups.
• 5% most common deal. Approximately 34.7% of forecasts anticipate a 5% pay award, with 13.8% forecasting a 4% increase as the next most common projection.
• Minimal pay freezes. Just 4.5% of forecasts anticipate no salary increases for employees during the 2023/2024 period.
• Greater sector uniformity. There’s little variation between broad sectors, with manufacturing and not-for-profit sectors expecting pay awards of 5%, while private-sector services and public services both foresee awards around 4.8%.

Sheila Attwood, XpertHR senior content manager, data and HR insights, said: “After a year of strong pay growth driven by a tight labour market, signs of a cooling market are beginning to emerge, influenced by a sustained period of higher interest rates reducing both confidence in the economy and wage settlement demands. With inflation now on a downward trend, we are already seeing lower pay rises than in the first half of the year.

“For the coming year, around three-quarters of organisations sharing their pay forecasts see inflation and living costs continuing to put upwards pressure on their pay awards. We therefore believe that while pay awards will fall back, this will only be to around 5% as organisations balance employee expectations with affordability.”