Pay deals slide below 3% mark

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The Independent Online
WAGE SETTLEMENTS are sliding below 3 per cent and are predicted to fall even further in the millennium.

The decline is being fuelled by falling inflation, sluggish economic growth and weaker corporate performance, according to the research group Industrial Relations Services.

However, the key determinant of pay was still the Retail Price Index and the current headline rate of 1.6 per cent is forecast to dip to 1.1 per cent by the end of the year, IRS points out.

An analysis of the critical April wage-round found that two-thirds of organisations were granting their employees lower increases than last year.

Half the pay deals were worth between 2.5 and 3.3 per cent, down from the 2.8 to 3.5 per cent range in March and well below January's 3 to 3.6 per cent spread. Researchers analysing data from 1,500 public and private sector employers report that deals have been running at about 3 per cent for four months.

With inflation on a projected downward course, IRS predicts: "The most likely prospect is that pay awards will dip further as we approach the millennium."

The declining settlements will ameliorate the inflationary blip predicted around the millennium holiday when some employers are predicted to pay substantial bonuses.

Meanwhile, "huge" differences in labour costs across the European Union have been exposed by the euro, according to separate research published today by the consultancy William M Mercer.

Belgium comes top with an average 41,553 euros, while Portugal's is just 11,298. The UK ranks eighth out of the 15 states with an average of 35,439 euros. The European average is 32,661 euros.

The percentage of pay taken by "social" costs presents a different picture. Italy has the highest with 57 per cent. At the other end of the scale Denmark is at 7 per cent, with the UK at 19 per cent.