Private Sector Wages Finally Outpace Public Sector Wages

pay raise ahead

According to recent research by XpertHR, private sector pay increases has finally overtaken that of the public sector in the United Kingdom.  In fact, private sector wage increases are now double those of the public sector. This is significant because the public sectors continual dominance in this sector was a source of much agitation for many British people.

Public Sector Joins The Real World

Despite usually having a lower starting wage, the British public sector contained numerous other benefits. A fabulous pension, job security and for certain roles automatic pay increases. While to some these were viewed as compensation for the lack of opportunities to make the huge amounts of money available in the private sector, there have been many detractors.  And since the financial crisis the general public have become increasingly vocal about their opposition to what they see as rewards without having to produce results.

This resulted in pay freezes for the public sector, the pension scheme being changed, performance reviews being taken more seriously and strikes by teachers and other public sector workers.      

Even with the pay freezes many public sector workers have received automatic pay progression every year, which for a typical teacher may be £1000. As such it is easy to see how the public sector had a monopoly on pay increases for so many years.

For example in 2010 the public sectors pay increases were nearly double that of the private sector. The pay increase was calculated to be roughly 1.5% for private sector employees compared with a growth rate of 2.3% for public sector employees.

The current Chancellor, George Osborne, has been keen to remove these kind of incentives for teachers, stressing that all of the British people need to feel the cuts together.

‘Progression pay can at best be described as antiquated – at worst, it’s deeply unfair to other parts of the public sector who don’t get it and to the private sector who have to pay for it,’ Mr Osborne said.

‘So we will end automatic pay progression in the civil service by 2015/6. And we are working to remove automatic pay rises simply for time served in our schools, NHS, prisons and police.’

Private Sector Pay Rises From The Ashes

However, recently private pay increases have removed the monopoly from the public sector. The median pay increase in the private sector for the last three months was 2.1% compared with 1% for the public sector.  The highest median increase has been in the manufacturing and production industry where it was roughly 2.7%.

Encouragingly only 7.1% of employees had a pay freeze in the second quarter of 2014, at the same time 25% of employees had a pay increase of 2.8% or more.

According to Benefits Editor at XperHR, Sheila Attwood, “Higher awards are being made and fewer employers are making pay freezes, As attention starts to turn to the New Year wage round, we are hopeful that we will see an upturn in settlement levels during 2015.”

Any reduction in pay freezes and a rise in pay increases can only be seen in a positive light. However, for it to be truly positive news it needs to be truly inclusive. People are looking for an economic recovery that both public and private sectors can enjoy together and will get people back into meaningful work.

But in place of a fully inclusive recovery, private sector employees can for the time being take solace in the recent pay increases. The tables have finally turned on what they have seen as hapless and lazy, state funded employees. Public sector employees will finally have to work for a living and actually perform in order to get their pay rises. And who said miracles never happened.