- Public sector pay increases have outpaced those in the private sector by 5.7% since 2006
- Average UK salaries have risen by 11.4% since 2006 – but slid 8 percentage points below inflation
- CEOs’ salaries have increased by just 1.3% - a real terms fall of 18%
The percentage pay gap between the public and private sector has widened since the last boom, according to analysis of ONS data carried out by Randstad, the UK sector specialist recruiter.
Average annual salaries in the public sector have increased by 15.9% since 2006 compared to 10.2% in the private sector.
As a group, health and social services managers have realised the strongest growth over the last six years in the public sector with average salaries increasing by 21.1%. Social workers have seen average salaries rise by 17%, an uplift of £4,559. Housing and welfare officers have increases of 12%.
Teaching professionals, too, have seen their wages outstrip that of the average UK worker, rising by an average of 11.6%, equivalent to £3,799 per year. Teachers in Further Education have seen their pay rise faster than their colleagues in Higher and Primary Education, increasing by 14.7%.
The private sector has also seen some strong uplifts but it is by no means an entirely uniform picture. For instance, despite being at opposite ends of the career spectrum, two big winners are managers in financial institutions and metal forming, welding and related trades workers, who have seen pay rise by 20.2% and 22% respectively. Yet chartered accountants’ pay is only up 1% with insurance underwriters barely registering a pay increase at 0.4%, while management consultants and actuaries have seen pay fall by 5.8%.
Mark Bull, UK CEO of Randstad said: “It’s tempting to think of the prolonged post credit crunch period as one long flat patch – with static salaries to match. But actually it’s been more like the board game snakes and ladders. For example, whilst the private sector was hit harder by the global economic crisis and saw salary gains slide back rapidly, pay increases of public sector employees remained insulated for a longer time. But with more public sector cuts to come in this parliament, the pattern could easily reverse. It’s also not just a simple story of public versus private remuneration. In every sector there are pockets of people whose skills have seen them in increased demand, driving their pay up at a different rate to others.”
“Metal workers and chartered accountants are two contrasting careers but their differing fortunes over the last 6 years have been driven by the same principle. Where fewer people train in a specific skill set and demand from companies is strong, salaries increase. When the converse is true pay just bumps along. Most accountancy firms reduced their graduate intakes after the initial recession, and with lower demand, the general pay competition between firms seen previously suddenly stopped. In contrast, while the number of metal work trainees appears to have been reducing, major projects like the Olympic infrastructure and Crossrail has led to more competition among employers in a relatively small skills pool, and pay has risen accordingly.”
The average annual salary of a UK employee has risen by 11.4% compared to before the credit crunch. Despite the improvement, the average UK employee is worse off in real-terms. Inflation has outstripped pay by 7.9 percentage points, and the average pay rise would have needed to be 19.3% simply to keep track with the rising cost of living over the period.
Average pay inflation since 2006 has varied across the UK. The North East has seen the biggest percentage increase, with pay climbing by 12.3%, while London has seen the largest cash terms increase, growing by £3,982 (11.6%). The East of England and the North West have been the most sluggish, rising by 8.9 and 9.1% respectively. However, even in the North East, the best performing area, pay has risen 7 percentage points below the rate of inflation.
Mark Bull adds: “Salaries have improved in the last year, but they are still a long way from matching the rising cost of living as companies look to keep costs as low as possible in the difficult economic environment. But it’s vital that economic prudence in the short-term is balanced with long-term goals. Recruiting and retaining the best talent is a crucial component to a company’s success, and looking to cut corners financially can often be a false economy, undermining staff morale and the quality and productivity of the workforce.”
CEOs’ salaries still squeezed
Annual salaries for the most senior leadership roles have seen far slower growth than those of average employees as a result of the economic downturn. The salaries of the 61,000 CEOs and directors of major organisations in the UK is just 1.3% higher than in 2006, a real terms fall of 18%. Over the period, gross pay only returned to positive territory in nominal terms in 2011.
Giles Rhodes, compensation and benefits manager at Randstad, comments: “The salaries of the loftiest positions in a company are closely tied to an organisation’s financial performance. Many companies are yet to hit the heights seen before the downturn, and as a result pay growth outside the FTSE 100 has been muted since the last boom, despite the improvement last year.
“There has also been a shift in the way remuneration packages are put together. CEOs and directors’ overall remuneration is increasingly bolstered by long-term incentives like share-options, and deferred bonuses, in the place of bigger monthly pay cheques – especially in FTSE 100 companies. In the last year, while the salaries of FTSE 100 CEOs increased by around 3%, the average value of long-term incentive plans increased by 8%.”
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