Fall in pay deals points to easing jobs market

PAY SETTLEMENTS fell last month, ending a trend of rising wage deals, according to a report that may allay fears at the Bank of England over growing pressure in the jobs market.

More companies are striking wage deals below 3 per cent, the pay research group Incomes Data Services (IDS) said.

Just a quarter of the latest 108 pay settlements, covering 1.3 million employees, were less than 3 per cent, compared with 15 per cent in January. About half of settlements were worth between 2 and 3.4 per cent.

However, pay levels are still running ahead of inflation, which has now fallen to historically low levels.

Inflation was just 1.3 per cent in May but analysis showed that one in five deals was worth more than 4 per cent, with one industry-wide settlement for the construction business logged at almost 10 per cent.

IDS said the level of pay settlements was falling despite fears that a combination of the national minimum wage and the approaching millennium would force pay bargains 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 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 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.

It also emerged that average earnings for full-time workers have broken through the pounds 20,000 barrier. The average pay package in April stood at pounds 20,700 compared with pounds 20,047 12 months earlier. It 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. IDS's average pounds 20,700 annual earnings compares with a figure 25 years ago of pounds 2,480 a year for male full-timers and pounds 1,400 for women.

Pay is just one of the areas where changes are taking place for the workforce. Flexible working is now widespread, with many firms reporting increased performance, according to another survey out today. The Institute of Management said eight out of 10 employers operated flexible working hours to meet changing business demands, remain competitive and give employees the chance to juggle home and work life.