Average earnings break through pounds 20,000 mark

AVERAGE EARNINGS for full-time workers have broken through the pounds 20,000 mark, despite a continuing moderation in the level of pay settlements, according to a report published today.

The average pay package now stands at pounds 20,700, compared with pounds 20,042 a year ago, the pay research group Incomes Data Services (IDS) said. This is the first time these figures have been published.

The index of earnings for full-timers rose by 3.6 per cent over the 12 months to April compared with an inflation rate of 1.6 per cent over the same period. But IDS said that the level of pay settlements was falling despite fears that a combination of the National Minimum Wage and the approaching millennium would force pay levels up.

"Neither pay settlement levels nor average earnings figures are showing any upward blip as a result of the minimum wage coming into operation," IDS said. "While the new measure must have had some impact on average earnings, the host of other factors influencing the figures make it impossible to gauge the effect."

The latest analysis of pay reviews showed about half of settlements were worth between 2 and 3.4 per cent.

IDS said that the number of settlements below 3 per cent were rising, although few firms are settling below a "floor" of 2.5 per cent.

But pay rises are still running well ahead of inflation, with one in five deals worth over 4 per cent. Inflation was just 1.3 per cent in May.

The Bank of England, whose Monetary Policy Committee sets interest rates, warned in its quarterly inflation report in May that earnings growth might no longer be falling.

It said that it feared earnings growth remained higher than settlements because of bonuses and merit-based pay.

But it said comparisons were difficult because the Average Earnings Index was only reinstated in March following a review commissioned by Gordon Brown, the Chancellor.

IDS's average pounds 20,265 annual earnings compares with a figure 25 years ago of just pounds 2,480 a year for male full-timers and pounds 1,400 for women.

Changing pay levels are only part of the shift in working practices. According to another report out today, Britain is on the brink of a "workstyle revolution" as the 9 to 5 working week becomes consigned to history.

Flexible working is now widespread, with many firms reporting increased performance. The Institute of Management said 8 out of 10 employers operated flexible working to meet changing business demands, remain competitive and give employees the chance to juggle home and work life. Flexible working includes working from home, job sharing, shift-work and school term-time working.