Pay settlements are edging closer to inflation levels – but only because inflation is falling – reports pay specialists XpertHR.

In the three months to the end of August 2012, the median basic pay increase in the private sector stood at 2.5%, unchanged on the figure for the three months to July. With retail prices index inflation falling to 2.9% in August this puts pay awards at just 0.4 percentage points below the rate of inflation.

For the gap to close further, inflation will have to continue falling, as pay rises in the private sector are firmly within the 2% to 2.6% range seen over every rolling quarter for the past year and showing no signs of increase, says XpertHR.

Across the economy as a whole, pay awards are at a median 2.4% – slightly lower than the private sector figure due to the continued prevalence of pay freezes in the public sector.

XpertHR has also recently calculated pay settlement levels over the past year. Key findings on pay awards effective between 1 September 2011 and 31 August 2012 include:

• Across the economy as a whole the median basic pay award is 2.5% – 0.5 percentage points above the 2% median recorded in the year ending 31 August 2011.
• Half of all pay awards are worth between 1% and 3%.
• Pay freezes account for 17.3% of all pay deals over the past year.
• In the private sector, the median increase is also 2.5%. Half of all basic pay awards fell between 1.5% and 3%.
• In the public sector, pay awards were worth a median nil during this period. Half of all pay awards were worth between nil and 1.5%.
• In the manufacturing sector, the median pay award was marginally higher than across the whole economy, at 2.6%. Half of pay awards were recorded between 2% and 3%.
• In the services sector pay awards were lower than across the rest of the economy, at a median 2%. Half of pay awards were worth between nil and 2.8%.