Pay awards have hit a brick wall after the coronavirus pandemic lockdown brought three months of increasingly buoyant settlement data to a sudden halt.
In the three months to the end of March 2020, pay analysts XpertHR recorded awards running at a median 2.4%. But with all settlements in the sample taking effect before the country went into lockdown, the picture painted by the data is very different to that now emerging. More recent XpertHR research shows many employers putting 2020 pay awards on hold for the foreseeable future.
Latest pay award findings
In the three months to the end of March 2020 XpertHR recorded a 2.4% median basic pay award across the economy (a small increase on the 2.3% median pay award recorded for the three months to the end of February 2020). Based on a sample of 180 basic pay awards effective between 1 January and 31 March 2020, we find that:
- Interquartile range stable. Pay awards continue to congregate around the median, with the middle half of pay awards falling between 2% and 2.8%, unchanged on the previous rolling quarter.
- Four in 10 deals lower than previous year. Based on a matched sample, a majority (40%) of pay awards are lower than the same group of employees received the previous year. One-third (34.4%) are the same in both years, while just a quarter (25.6%) are higher than a year ago.
- First pay freezes due to coronavirus lockdown. Thirteen organisations in our sample (5.9%) froze pay. All of these pay freezes took effect from 1 January 2020, but one organisation that had not previously agreed an increase from this date made the decision in late March “as a consequence of the challenges facing the industry”.
- Most common pay award is 2%. Although the median sits at 2.4%, the most common pay award remains at 2% – awarded in 26.7% of cases. This was followed some way behind by deals worth 2.5% (15.6% of basic pay awards) and 3% (12.8%).
Coronavirus and pay awards
As the country went into lockdown on 23 March, many organisations were agreeing pay awards to take effect in April 2020, as well as finalising those that had been due to take effect earlier in the year. The environment in which these discussions were taking place had already started to change as the pandemic took hold, but the lockdown brought a whole raft of further consequences to factor in.
In early April we conducted a short survey of 400 organisations, asking how they were addressing some of the people management challenges that have arisen. One of these centred on pay awards and bonus arrangements.
Only 16.5% of respondents said that they didn’t think their organisation’s 2020 pay review or bonus payments would be affected by the coronavirus pandemic, although a further 32.8% were unsure or felt it was too soon for them to say. But the majority (50.8%) agreed that there would be some impact on these elements of reward, so we asked what this might be.
There are two clear approaches to pay awards from those organisations that expect an impact from the coronavirus pandemic: organisations that can already say that there will be a pay freeze, and those who have put any review on hold.
Among those organisations certain of a pay freeze are some that had previously pencilled in an increase from April 2020. For example, a charity told us that “we were planning to implement a 2% increase from 1st April but have had to put this on hold until we fully understand the financial implication of the current crisis caused by the pandemic.” A manufacturer that was due pay reviews in April and July said that “no pay review will be paid”.
Others have not yet made a firm decision not to increase pay this year, but will instead review their position at some point in the future. A private-sector-services company has already planned ahead for a later review date: “We have communicated that our pay review which is normally implemented in May payroll will be postponed for three months and reviewed at that time.” Others are hoping that the delay in making a pay review will be compensated for, with a retailer “postponing, but planning to back pay to April” although a manufacturer was less optimistic and said that they “may not backdate to 1st January”.
With the increase in the national minimum wage rates having gone ahead from 1 April, several respondents noted that pay awards will be limited to affected employees only.
XpertHR pay and benefits editor Sheila Attwood said:
“In the first few months of the year there was a clear upward trend in pay increases. However, we expect this to go no further, with pay pauses and pay freezes becoming commonplace as a result of the coronavirus crisis.”