Median pay settlements 'at 2.5%'

Pay rises have been stable in recent months despite uncertainty over the economy, with median settlements worth 2.5%, according to research.

Three out of four settlements in the quarter to August were worth between 2% and 3.9%, with a fall in the number of deals above that level, said Incomes Data Services (IDS).

RPI inflation has fallen below 3% so the gap between wage settlements and the cost of living has narrowed over the past year, said the report.

A study of 450 agreements so far this year, covering five million workers, shows that most employers increased pay, with a median rise of 2.75%, although one in eight involved pay freezes, mainly in the public sector.

Alastair Hatchett, of IDS, said: "Despite the return to recession, we've found that pay settlements in 2012 have held up at around the levels we forecast last year: between 2.5% and 3%.

"Part of the reason for this is that we are operating in a two-speed economy in which some sectors are struggling but many others such as energy, pharmaceuticals and car manufacture are performing well and able to pay increases at a higher level."

Another report, by pay specialist XpertHR, confirmed that wage settlements are edging closer to inflation levels.

Spokeswoman Sheila Attwood said median pay deals had remained "remarkably stable", adding: "Pay freezes are still evident, and with inflation falling, the number of pay deals worth more than inflation is rising.

"But at present we see no evidence of a shift in the median pay settlement over the coming months."