Whole economy

Median 2.0%

Average 2.1%

Weighted average (by employee nos) 1.9%

Inter-quartile range 2.0 to 2.7%

Median by sector

Private sector 2.2%

Manufacturing & production 2.0%

Private services 2.3%

Public sector 1.0%

Not-for-profit 1.9%

Based on 42 settlements covering 759,920 employees

Source: IDSPay.co.uk

Pay Settlement Data - three months to end of Nov 2014

bargaining briefUnite

Unite the Union January 2015

INTRODUCTION

IDS Pay reports that pay awards remain stubbornly low in the three months to November, as the higher level of minimum wage uplift in2014 fails to translate into higher headline awards for many employees. Instead, settlements are following a similar course to 2013,when settlement levels dropped in the latter part of the year.

PAY SETTLEMENTS

MEDIAN SETTLEMENT HOLDS STEADY IN NOVEMBER

(JN????) HB2601151

Much recent media coverage has been given to figures showing that earnings are no longer falling in real terms. Whilst this iswelcome, we must not forget that this is largely due to low inflation levels and that wage increases are still low with earnings notexpected to reach pre-crisis levels until after the 2020 election1. In addition, continued higher than inflation increases are by nomeans a certainty2.

IDS reports the median settlement as unchanged at 2% in the three months to November 2014 with a median of 2.2% in theprivate sector, 1% in the public sector and 1.9% at not-for-profit organisations.

The New Year saw the debate over the merits of RPI and CPI inflation measures revisited. As a result, and for ease of reference,we have reproduced towards the end of this Bargaining Brief the report from December’s issue on a former Cabinet Officeeconomist’s finding that RPI is a more suitable measure for uprating pay.

John Earls, Editor

The median pay settlement across the economy remained unchanged at 2% in the three months to November 2014, according to thelatest figures from IDS Pay. This is in line with the median for the three months to October, but lower than the figures recordedthroughout the rest of 2014.

http://www.tuc.org.uk/economic-issues/labour-market/britain-needs-pay-rise/young-workers-forum/full-wages-recovery-sethttp://leftfootforward.org/2015/01/prospects-for-living-standards-still-poor-as-earnings-growth-remains-slow/

Household expenditure 2.5%

Tobacco 7.7%

Gas 3.1%

Electricity 2.0%

Housing 3.5%

Water and other charges 2.4%

Clothing & footwear 6.4%

Personal expenditure 4.0%

Rail fares 3.9%

BREAKDOWN OF KEY RPI STATISTICS ANNUAL RATE

DECEMBER INFLATION FIGURESRETAIL PRICE INDEX (RPI) 1.6% (down from 2.0% in November)

CONSUMER PRICE INDEX (CPI) 0.5% (down from 1.0% in November)

Source: www.ons.gov.uk

NO UPWARD PRESSURE FROM NMW INCREASEAs was identified by IDS Pay in last month’s settlement analysis, the higher increase in the National Minimum Wage (NMW) has not hadthe anticipated effect of pushing pay awards to a higher level. The NMW rose by 3% in 2014, as opposed to 1.9% in 2013, but themedian award as recorded in IDS Pay has followed a similar trajectory in both years, falling to 2% in the second half of the year.

IDS find that: “This is in part because although many employers increased pay by 3% at the bottom of their payscales to comply with theminimum wage uplift, a significant proportion chose not to extend this award throughout their pay structure to maintain differentials.Instead, they chose to pay a headline increase at a lower level, and to make higher awards to the lowest-paid employees as an underpinningmeasure to comply with NMW legislation. Examples in the latest settlement analysis include retail staff at both Mothercare and the EarlyLearning Centre, where headline increases of 2% were supplemented by 3% uplifts to those aged over 18 and on the National Minimum Wage.”

Some retailers did, however, pay 3% to all staff, in some cases though not all, because large numbers of their staff are on the statutoryminimum. Examples of companies paying 3% as their overall headline award include Argos, Halfords, KFC and Costa Coffee.

PRIVATE SECTOR MEDIAN FALLS SLIGHTLYIDS figures show that the median pay award across the private sector fell to 2.2% in the three months to November 2014, down from2.3% in the three months to October. This fall was mainly a result of the median in manufacturing and production falling from 2.2% to2.0%, since the median award in private services remained steady at 2.3%. The median award in the public services remained at 1%,and the median at not-for-profit organisations fell slightly to 1.9%.

The distribution of settlements has remained largely steady, with just over half of all awards recorded between 2 and 2.99%. Just undera quarter of employers paid increases of 3% and above, with most of these at exactly 3%. Just under a fifth of employers made awardsbelow 2%, predominantly in the public or not-for-profit sectors, and pay freezes remain very rare.

(Source: IDS Pay)

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The rate of inflation fell sharply to 1.6% in the year to December 2014, as measured by the Retail Prices Index (RPI). This represents afall of 0.4 percentage points from the inflation figure of 2% recorded in the year to November.

This drop in inflation was primarily driven by a fall in wholesale fuel prices, with corresponding effects on retail prices. The largestdownward contribution to the rate of inflation was from fuel and light, with prices for electricity and gas remaining unchanged in 2014compared to significant rises in 2013.

The second-largest downward effect on the RPI came from motoring expenditure, where petrol and diesel prices fell in 2014 following arise in 2013. The price of petrol as recorded in the RPI was 119.8p per litre in December 2014, 8.4% cheaper than December 2013. Theprice of diesel stood at 124.8p per litre in December 2014, 10% down on the previous year. The size of these combined effects meansthat the speed at which the cost-of-living had been increasing has slowed, despite small offsetting rises in areas such as fares and othertravel costs.

The Consumer Prices Index (CPI) measure of inflation, the Government’s preferred measure for many macroeconomic purposes, also fellas a result of similar pressures from wholesale fuel prices. CPI inflation fell from 1% in the year to November 2014 to just 0.5% inDecember 2014, its lowest rate since May 2000.

(source: IDS Pay)

Economists revise down RPI forecasts as prospects for rate rise recedeIDS Pay report that City economists have revised down their forecasts for the RPI as a result of lower than expected inflation in recentmonths. There is also increased uncertainty on the timing of the Bank of England’s first interest rate rise, with many forecasters pushingback their previous projections. Inflation is, therefore, likely to be lower than previously thought over the next 18 months. However, aconsensus is emerging that earnings growth will finally begin to recover in 2015.

The latest inflation forecasts from IDS’ sample of City economists have seen major downward revisions from the last quarterly round-up.Inflation has been far lower in recent months than previously projected, with November’s RPI and CPI both 0.6 percentage points lowerthan last quarter’s forecasts predicted. Lower inflation has led the forecasters to push back their projections for the timing of any rise ininterest rates which, in turn, has fed through to lower projections for the RPI over 2015.

Looking ahead over the next 18 months, projections for RPI inflation have been revised down, on average, by 0.7 percentage pointsfrom the previous set of City forecasts. According to the majority of economists in IDS’ sample, the RPI is now set to fall below 2% inDecember, only climbing above that level in spring 2015. The majority see the RPI reaching 3% by the end of 2015, and continuingto rise steadily into 2016.

According to IDS Pay: “Both domestic and international economic trends have ensured a lower starting point for the latest inflationforecasts than previously projected. Internationally, falling oil prices, as a result of lower global demand and increased supply, have hadsignificant disinflationary effects on petrol prices in the UK. In addition, growth in the strength of sterling has led to lower import costswhich have also acted as a drag on inflation. Domestically, inflation has been further subdued by competition over prices betweensupermarkets and lower unit labour costs across the economy.”

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December

January 2015

February

March

April

May

June

July

August

September

October

November

December

January 2016

February

March

April

Source: IDS Pay

All-items retail price inflation forecasts, 15 December 2014

CE%INC

CG%INC

DB%INC

GS%INC

MS%INC

NO%INC

ROUNDED

AVERAGE %INC

1.7 1.7 2.0 2.1 1.9 1.9 1.9

1.9 1.4 2.1 2.2 1.8 1.8 1.8

1.8 1.3 2.1 2.2 1.9 1.7 1.8

1.8 1.3 2.3 2.3 2.0 1.8 1.9

1.9 1.4 2.3 2.3 2.0 2.3 2.0

2.2 1.7 2.5 2.5 2.1 2.5 2.2

2.1 1.8 2.4 2.3 1.8 2.3 2.1

2.1 1.8 2.6 2.3 2.0 2.3 2.2

2.1 1.9 2.6 2.3 2.0 2.5 2.2

2.2 2.1 2.7 2.4 2.3 2.9 2.4

2.4 2.3 2.9 2.6 2.3 3.0 2.6

2.5 2.6 3.0 2.7 2.4 3.3 2.8

2.6

2.6

3.0 3.2 2.8 2.6 3.4 2.9

RBS%INC

1.9

1.8

1.8

1.8

2.0

2.0

2.0

2.1

2.2

2.4

2.6

2.8

2.8

SG%INC

1.8

1.7

1.6

1.7

1.9

1.8

1.9

2.1

2.3

2.2

2.4

2.8

3.0

3.2 3.1 2.8 - 3.4 3.02.9 3.1

2.6 3.3 3.1 2.8 - 3.5 3.12.9 3.2

2.6 3.5 3.1 2.8 - 3.5 3.13.0 3.2

2.6 3.6 3.2 2.9 - 3.4 3.13.0 3.2

Forecasters: CB Commerzbank; CE Capital Economics; CG Citigroup; CS Credit Suisse; LB Lloyds Bank; MS Morgan Stanley; NO Nomura;RBS Royal Bank of Scotland; SB Scotia Bank; SG Société Générale.

RECENT UNITE SETTLEMENTS AS REPORTED TO THE PAY & CONDITIONS DATABASE ONLINELRD PAY & CONDITIONS DATABASE ONLINE – SUMMARY OF PAY ROUND

01/01/15 GKN Driveline Birmingham 3.50%01/01/15 Rolls Royce Motor Cars 3.50%05/01/15 Engineering Construction (NAECI) NJC 3.20%01/01/15 Network Rail (Signallers, Operational and Clerical Grades) 3.10%01/01/15 Rolls Royce Submarines - Raynesway Main Site (Derby) 3.00%01/01/15 HJ Heinz 2.75%01/01/15 Rudolph & Hellmann Automotive 2.75%01/01/15 Ball Packaging 2.70%05/01/15 Refractory Users Federation 2.70%01/01/15 Urenco 2.60%05/01/15 Abellio Byfleet Surrey 2.50%01/01/15 Kelloggs (Wrexham) manual 2.50%01/01/15 Mettis Aerospace 2.50%01/01/15 Varian Medical Systems 2.50%04/01/15 First South Yorkshire 2.46%01/01/15 DHL Supply Chain (Marks & Spencer) Warehouse Ops 2.40%01/01/15 Arriva Yorkshire 2.00%01/01/15 Caterpillar Building Construction Products (BCP) 2.00%01/01/15 DHL Supply Chain (Marks & Spencer) UK Drivers 2.00%05/01/15 Electrical Contracting (Scotland) JIB 2.00%05/01/15 Electrical Contracting JIB 2.00%01/01/15 Prysmian Cables (Eastleigh) 2.00%01/01/15 Prysmian Cables (Wrexham) 2.00%01/01/15 Thermal Insulation Contractors Association (TICA) 2.00%

SettlementDate

Agreement StandardIncresse

4

The table below is based on the mean average earnings figures published in the Annual Survey of Hours and Earnings (ASHE) 2014. Theoriginal figures have been “uprated” by the 0.2% increase in average weekly earnings for the whole economy between April and Octoberto give an estimate of earnings now.

Total average weekly earnings rose by 1.7% in the three months to November 2014 compared with the same period a year earlier,according to figures from the Office for National Statistics (ONS). Excluding bonuses, earnings for the whole economy grew by 1.8%.This is the highest increase in regular earnings since mid-2012, although it is still well below pre-recessionary levels. Pay growth onboth measures has now risen for five consecutive months, with total pay increasing by 0.3 percentage points on the equivalent figuresfor October. However, a lower single-month growth figure in November of 1.8% suggests that the current trend of rising earnings growthis not yet firmly entrenched.

Earnings growth at the whole economy level remains behind increases in prices, as measured by the retail prices index (RPI) in November.Compared to a year earlier, total earnings growth in the three-month period to November 2014, was 0.3 percentage points lower than the2% rate of inflation, as measured by the RPI over the same period. It is, however, the second consecutive month that both measures ofearnings growth have been above the Government’s preferred measure of inflation, the CPI (which stood at 1.3% in October and 1% inNovember). If oil prices continue to fall, we may expect next month’s figures to show earnings growth also pulling ahead of RPI.

(Source: IDS Pay)

PRIVATE SECTOR PAY GROWTHIDS analysis of the earnings figures reports that rising earnings growth at the whole-economy level is being driven predominantly bythe private sector, where total pay growth stood at 2.1%, some 0.4 percentage points higher than the previous three-monthly figure.Growth in regular pay, which excludes bonuses, rose by 0.2 percentage points, to stand at 2.2%. The last time that regular pay growth inthe private sector was higher was over five years ago, when it stood at 2.5% in the three months to March 2009. The fact that regular paygrowth in the private sector is stronger than total pay growth suggests that the widespread postponement of bonus payments in 2014, inorder to allow high-earning employees to benefit from the fall in the higher tax rate, is still having an influence on the earnings figures.

The strongest growth in both total and regular pay occurred in finance and business services, standing at 2.6% and 2.8% respectively.Both measures saw a significant increase on the previous month’s figures, with growth in total pay rising by 0.6 percentage points andregular pay rising by 0.5 percentage points. Single-month growth figures in finance are also the highest of any sector, at 2.7% inNovember for both total and regular pay.

Total pay growth is also relatively strong in construction (2.3%), services, and manufacturing (both 1.7%), although all these sectorsexperienced a fall on the previous month. Within the private sector the biggest increase in total pay growth, on both the single-monthand three-month measures, has been in wholesale and retail. Total pay in this sub-sector increased by 0.9 percentage points on theprevious month’s figure to 1.3%. This is the only area of the private sector in which the single-month figures increased this time,suggesting that the higher uplift in the minimum wage in October 2014 has had some influence. Unlike many other areas of theeconomy, pay reviews in this sector tend to take place later in the year to coincide with the annual increase in the statutory floor.

Earnings growth in the public sector continues to be restrained by government pay policy, with both total and regular earnings growingby just 1.2%. Public sector growth in regular earnings fell on the previous month’s average, by 0.1 percentage points.

(Source: IDS Pay)

EARNINGS AND PAY

Full-time average weekly earnings by occupation

Source: www.ons.gov.uk/ons/rel/lms/labour-market-statistics/december-2014/index.html

£ aweek

All employees 621.40

All male 674.30

All female 540.30

Managers 973.30

Professionals 792.80

Associate professionals 671.90

Admin & secretarial 452.10

Skilled/craft 524.20

Services 362.20

Sales 371.60

Operatives 482.00

Other manual jobs 367.40

Percentage Annual Rise in Average Weekly Earnings(Total Pay) November 2014

http://www.ons.gov.uk/ons/publications/re-reference-tables.html?edition=tcm%3A77-347481

Whole Economy 1.7%

Private Sector 2.1%

Public Sector 0.7%

Public Sector excluding Financial Services 1.2%

Manufacturing 1.7%

Services 1.7%

Construction 2.3%

Wholesale, Retailing, Hotels & Restaurants 1.3%

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Pay awards end 2014 at 2% and New Year settlements fail to make animpact (XpertHR)Pay awards in 2014 ended the year below where they started, with the median basic pay rise for UK employees standing at 2% in thethree months to the end of December 2014. This compares with a 2.4% award recorded in the first quarter of last year. The latest figuresfrom pay analysts at XpertHR continue to reflect the subdued nature of pay bargaining within businesses in the UK.

Other key findings from XpertHR's latest quarterly analysis of pay awards include:

• The middle half of pay awards effective in the three months to 31 December 2014 are worth between 1.6% and 3%.

• The most common pay award was a 2% increase.

• Within the private sector, manufacturing-and-production companies continue to offer higher pay rises - at a median 2.8% - than those operating in private-sector services, where pay awards are typically worth 2%.

• Pay freezes account for just 6% of all pay awards.

• Pay awards in the public sector were worth a median 1.5% in the 12 months to the end of December 2014, compared with 2% inthe private sector over the same period.

Pay award levels have also fallen below the level of both retail prices index (RPI) and consumer prices index (CPI) inflation, which stood at1.6% and 0.5% respectively in December 2014. While this provides some welcome news for employees, the level of pay awards remainslow and shows little sign of upward movement.

Private-sector employers surveyed by XpertHR have predicted a 2% median pay award over the year to August 2015. Pay awards duringthe final four months of 2014 have been at 2%, and the first 2015 deals to conclude are not showing any signs of significant movementaway from this level. XpertHR has collected details of 50 pay awards effective in January 2015. Among these, the median pay award is2.1%, just 0.1 percentage point higher than the going rate for the end of 2014.

(Source: XpertHR)

Report suggests RPI is more suitable than CPI for uprating payA report by a former Cabinet Office economist has assessed the accuracy of the two main inflation measures, the CPI and the RPI, inreflecting changes to the purchasing power of pay and pensions. The report, by Dr Mark Courtney, former Deputy Director and Head ofEconomics in the Regulatory Impact Unit of the Cabinet Office, found that ‘Overall...the RPI is as good a consumer price index as onecan get for uprating purposes.’

His finding is due to systemic differences between the CPI and the RPI which, according to the report, are entirely the result ofunder-estimation of price inflation by the CPI. This under-estimate has been running at 0.9% since January 2014, with the latest figuresfor each measure (in the year to October 2014) showing inflation at 2.3% (RPI) and 1.3% (CPI).

Gap between RPI and CPIThe gap between the two measures arises as a result of a number of factors. The first is the different coverage of the two indices. The RPIis targeted on the working population, since it excludes pensioners, tourists and the wealthiest 4% of the population. The CPI, by contrast,includes spending by pensioners, foreign residents and the highest earners. The RPI also includes owner-occupier housing costs, whichform a major element of most household expenditure. The CPI does not include these costs. The differences in coverage mean that theCPI has been lower than the RPI for 0.3 percentage points a year since the former was introduced in the UK.

Further to this, the RPI and CPI involve different statistical methods for calculating average price changes for the items covered by eachmeasure. The RPI uses an arithmetic average, while the CPI uses a geometric average. The type of arithmetic mean used by the RPI isregarded by statisticians as an unbiased – in the statistical sense – estimator of the average rate of inflation. However the geometricmean used by the CPI tends to be biased downwards. The resulting difference between the two measures, known as the ‘formula effect’,averages 0.6 percentage points.

According to the report, this under-estimate resulting from the use of the geometric mean has been defended in the past on the basis thatit allows for changes in consumer purchasing behaviour, towards goods or services whose prices have risen more slowly. But the reportargues that this neglects the fact that price changes are also driven by changes in demand for goods or services, and not just supplyalone. Therefore allowing for consumer substitution does not mean that one formula should be used in preference to another.

6

(JN????) HB260115

ACCESSING DATA

The data contained in this brief can all be obtained by using online

facilities available to Unite members and general websites.

Unite has provided a workplace representative’s guide to the web andthis is available at http://www.unitetheunion.org/pdf/Reps_guide_to_web.pdfIn addition all Unite members can access the pay and conditions databasemaintained by LRD at http://www.lrd.org.uk/payline or through the LRDwebsite – username: unite and password: opal961

www.unitetheunion.org

Contact Details

Bargaining Brief Compiler: Steve Martinsteve.martin@unitetheunion.org

Editor: John Earls john.earls@unitetheunion.org

COMPANY ACCOUNTS

All requests for information relating to company accountsare to be directed to: john.neal@unitetheunion.org

LRD’s annual Pay Survey is now available to read at:

http://www.lrd.org.uk/payline/index.php?pl_rep=-4

The LRD 2014 Pay Survey was published in November 2014. The first part of the Survey contains details of more than 700 pay settlementsfrom August 2013 till the end of July 2014.

All members and officials of UNITE have access to the Payline database - www.lrd.org.uk/payline

username: unitepassword: opal961

When you log into Payline you will be able to access the enhanced version of the Pay Survey with links to the Payline records.

2014 PAY SURVEY AVAILABLE FROM THE LABOUR RESEARCH DEPARTMENT

Status of RPIThe CPI is currently the Government’s preferred measure of inflation, and while the Office for National Statistics (ONS) continuesto publish the RPI, it no longer has ‘national statistic’ status. This decision was reached partly on the basis that ‘the methods used toproduce the RPI are not consistent with internationally recognised best practice’. The RPI uses two types of the arithmetic mean,depending on whether or not the item whose inflation rate is being calculated is homogenous, and therefore competes with otheritems on price or availability. It uses the ‘ratio of averages’ (sometimes called the Dutot formula) when the items are homogenousand the ‘average of relatives’ (known as the Carli formula) when they are not.

While the Dutot formula is commonly used by other countries in assessing inflation, the Carli is not. The ONS found that the use of theCarli formula in the RPI ‘is the primary source of the formula effect difference between the RPI and the CPI, and that this formulationdoes not meet current international standards.’ Dr Courtney’s report argues that the rarity of the Carli formula elsewhere is becausemany countries, particularly in Europe and Asia, use tightly-defined, homogenous items to measure price inflation, unlike the UK.

Source: IDS

7