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1. ati (1) What chances of a pay recovery in 2018? Looking at evidence from the LRD Payline database on: • 2017 compared with previous pay rounds • January 2018 settlements: polarization among new deals? • Future staged rises: limits of inflation-proofing and pre-agreed increases • 2017 settlements in more detail: staging and long-term deals; inflation links; cash-based deals; low pay/higher pay; pay additions; bonuses and incentives; performance pay; pay structure; paid working time • Post-recession high-points at agreement level • Context in 2018: what might help, what might hinder www.LRD.org.uk 78 Blackfriars Road London SE1 8HF 1

2. (2) Monitoring pay trends • Data: from all levels of the trade union movement, supplemented by FOI, web sources, press reports, employer information • Focus: bargaining units, large and small • Numbers covered: Pay settlement data unweighted/weighted • Pay increase: Lowest basic rate (LBR) and standard (STD) increases • LRD Pay Surveys: usually based on settlements monitored by Payline effective during the pay round, from August to July • LRD Payline: data availability strongest in transport, storage and postal sector, manufacturing, public administration, the publishing /broadcasting/computer sector, finance and insurance, wholesale & retail 2 www.LRD.org.uk 78 Blackfriars Road London SE1 8HF

3. (3) Pay trends up to 2017 Median pay settlement levels: • pre-recession 2006-07 3.6%, 2007-083.9% • low point 2.0% in 2009-10, short-lived recovery to 2.75% in 2010-11 • 2.5% for 3 pay rounds, then 2.0% for 3 pay rounds (including 2016-17) Key concerns arising from that pattern: • losing ground relative to inflation (depending on how it is measured) • the share of output going to wages • productivity • the economic need for more wage-led growth • the potential role of collective bargaining in turning that around (e.g. OECD) 3 www.LRD.org.uk 78 Blackfriars Road London SE1 8HF

4. (4) Continuing the post-recession trend in 2017? Based on 878 pay deals: 2.3% lowest basic rate median (IQR 1.75%-3.00%) 2.1% standard increase median (IQR 1.71% - 2.75%) Top settlements: e.g. Virgin West Coast (Drivers) 9% Freezes: limited egg Archant, Vector Aerospace www.LRD.org.uk 78 Blackfriars Road London SE1 8HF 4

5. (5) January 2018 settlements Over 60 January pay rises known so far (about a quarter of what might eventually be received), with a particular profile: • Main industries and services: manufacturing, transport, private sector • Duration: 8 out of 10 staged or long term, 3 out of 10 newly negotiated • New deals: 11 un-staged deals plus 6 in their first stage (see next slide) • Value of new deals: January median 2.75%, • From a pay freeze to over 4%, with 2 at 2.5% - polarisation? • Features: cash-based, pay addition flow-through, London Weighting, bonus pay, working time limits, pay structure changes, maintenance of T&C, automation www.LRD.org.uk 78 Blackfriars Road London SE1 8HF 5

6. (6) The new January deals so far www.LRD.org.uk 78 Blackfriars Road London SE1 8HF 6

7. (7) Future 2018 pay rises Around 100 deals have an agreed future increase or formula effective between February and December that will contribute to the overall settlement level: • Duration: un-typical - all are existing long term deals • Inflation link: a third are linked to RPI inflation, a few to CPI • Timing: most (almost two thirds ) are effective in April • Industry: half in transport & storage, a fifth in manufacturing, also energy • Sector: only 4 are public sector bargaining groups Assuming three possible levels for inflation (RPI 3.0%/CPI 2.0%; or RPI 3.5%/CPI 2.5%; or RPI 4.0%/CPI 3.0%) these deals could be worth: • possible median increase on lowest basic rates: 3.0% • possible median standard increase: between 2.6% and 3.0% www.LRD.org.uk 78 Blackfriars Road London SE1 8HF 7

8. (8) 2017 results in summary Median results Lowest basic All 2.3% Private sector 2.39% Public sector 1.32% Standard increase All 2.1% Private sector 2.2% Public sector 1.0% Above-trend Accommodation & food 3.0% Transport etc 2.5% Wholesale/retail 2.5% Admin & support 2.5% Arts & entertainment 2.42% Manufacturing 2.39% Finance 2.31% Below-trend Electricity & Gas 2.29% Construction 2.25% Water 2.0% Mining etc 2.0% Real estate 2.0% Agriculture 1.75% Education 1.75% Publish/computing 1.5% Other services 1.5% Health etc 1.5% Public admin 1.15% Professional & scientific 1.0% www.LRD.org.uk 78 Blackfriars Road London SE1 8HF 8

9. (9) 2017 results (sectors with most deals) www.LRD.org.uk 78 Blackfriars Road London SE1 8HF 9

10. (10) Other sectors and industries www.LRD.org.uk 78 Blackfriars Road London SE1 8HF 10

11. (11) Public sector – slight loosening of pay cap? Trend in 2017: median 1.3% (lowest basic rate) but upper quartile 2.4%/2.0% standard • Largest deals (by workers covered): stuck close to 1% egg Local government E/W/NI NJC, NHS Agenda for Change, Police (E/W), HMRC, Home Office • Diversity: half of public sector deals are in public administration while a few large health & social care agreements cover many workers - but agreements in entertainment and recreation, transport, education (treated as public sector on Payline), finance, water, waste and forestry are more diverse. • 2%+ public sector rises: Caledonian MacBrayne 3.9%; London Underground 3.2%; Skills Development Scotland (average 3.1% including progression); Gateshead College 3%; Direct Rail Services 2.5%; Network Rail (maintenance) 2.2%; and 2% at George Best Belfast City Airport, Scottish Water and Metropolitan Police Staff • Scottish Government Policy: Allowed more scope for pay rises for low-paid workers and is now being wound up www.LRD.org.uk 78 Blackfriars Road London SE1 8HF 11

12. (12) Accommodation & food services McDonalds strikes in September 2017 were followed by reported rises of 4.6% or 6.7% and new pay rates which, for a Crew 25+ worker on £8-£10 per hour will be just above the 2018 NLW. In 2017 the sector had the highest pay median (3.0%): • DHL (Virgin West Coast Trains Contract): 10.5% after 6.6% rise and August cut in hours with no loss of pay • Caterlink (Camden Council): London Living Wage, 3.72% for lowest paid • Moto Hospitality: 3.5% on paybill and lowest basic, 8% differential between Customer Service Assistant and Supervisor , 19 sites moved to higher band • Baxterstorey (at ExxonMobil, Fawley): 3% backdated to July after strike • Arriva Trains Wales (At Seat Catering): 2.42% (voluntary Living Wage) • Royal Mail Holdings - Quadrant Catering: four-stage two-year deal • House of Commons Catering Staff: £325 or 1% www.LRD.org.uk 78 Blackfriars Road London SE1 8HF 12

13. (13) Features of 2017 deals www.LRD.org.uk 78 Blackfriars Road London SE1 8HF 13

14. (14) Inflation and staging in 2017 Inflation links • 8% of 2017 settlements explicitly linked to inflation (6% to RPI, 2% to CPI) • Nearly all were long-term deals, mainly transport, manufacturing & energy • Median 2.7% (2.6% standard), RPI-linked 3.1% (3.0% standard), CPI 1.6%; Staging • Short-term or one-year: 65.9% of deals, median 2.1% (2.0% standard) • Existing long-term deal, no inflation: 16.9%, median 2.2% (2.0% standard) • Existing long-term deal, inflation link: 6.9%, median 2.8% (2.6% standard) • New long-term deal, no inflation link: 9.0%, median 2.6% (2.5% standard) • New long-term deal, inflation link: 1.3%, median 2.5% (2.4% standard) www.LRD.org.uk 78 Blackfriars Road London SE1 8HF 14

15. (15) Low pay Just over 17% of deals included measures to boosting the value to lower-paid workers • LWF: the voluntary Living Wage played a role in almost 8% of deals, either in its own right or as an aspect of government pay policy (in Scotland) • Other low pay-boosting measures: adopted by negotiators, affected 6% of deals • Statutory: Increases in the statutory National Living Wage/National Minimum Wage clearly affected almost 4% of deals Examples of diverse approaches • Express Gifts (Findel Group): Grade 2 removed with staff upgraded to Grade 3, equating to a 3.6% increase for the lowest paid. • Environment Agency: 1% increase to minimums and maximums of Staff Grades 1-7 with the exception of the Grade 1 minimum increasing by 3.45% • G4S (RBS): Living Wage Foundation National Living Wage (£8.45ph) from 1 October 2017. Differentials for Team Leaders and Supervisors maintained at 6.25% www.LRD.org.uk 78 Blackfriars Road London SE1 8HF 15

16. (16) Cash-based deals Just over 11% of 2017 deals wholly or partly based on a cash element • Full or partial: Around a quarter of these deals are fully cash-based, more involve cash element that underpins the percentage rise, typically in a way that benefits lower paid staff. • Value: Predictably, cash-based deals had higher lowest basic median (2.4%) but a lower standard median value (2.0%) Examples Weetabix: a staged 1.5% increase, then 3% of base and shift pay as a one-off lump sum payment. Northern Gas Networks: a second-stage £3,000 flat rate increase across all salaries (plus a cut in the working week), equates to 15% for a Gas Operative www.LRD.org.uk 78 Blackfriars Road London SE1 8HF 16

17. (17) Pay additions One in five 2017 pay rises had some impact on additions to pay like allowances, premium rates etc. However: • That includes agreements where the pay increase flowed through to all or most allowances, simply maintaining their value relative to pay. • Around 6% of deals changed or improved pay additions • Less often they were consolidated, or diminished in value, e.g. by not changing or increasing in line with pay, or being “recycled”. Examples: DHL (Sainsbury's) Stoke: A £15 increase to the £200 Retention Bonus Visteon Engineering Services: Technical Professional Allowance up to £210pm Scottish Power Energy Networks: 2% pay rise/2.2% to flowthrough allowances www.LRD.org.uk 78 Blackfriars Road London SE1 8HF 17

18. (18) Bonus and incentives Just over 7% of pay deals refer to bonuses or incentive payments. With so much interest in productivity this could be an area for growth. Examples • Siemens Industrial Turbomachinery: 2% plus bonus payment of £850 on reaching production targets/upto £1,700 on exceeding production targets • HSE: An organisational bonus of £450 (expected) for all staff except poor performers. Staff with a performance mark of 'Strong' or 'Exceptional' receive a higher rate • Poundland Distribution Transport (Harlow): Non-infringement bonus doubles from 50pph to £1.00ph subject to achieving no vehicle damage/blameworthy accidents; and introduction of fuel competition for drivers www.LRD.org.uk 78 Blackfriars Road London SE1 8HF 18

19. (19) Performance pay & pay structures Almost 9% of pay deals were implemented in a way that involved an element of performance-related pay, while 6% of pay deals affected pay structures in some way, or addressed progression issues: • Scottish Power Energy Retail: 'Exceeded' 1.5% increase; for 'Fully Effective', a 1% increase • Office of Rail and Road (ORR): One-off non-consolidated performance awards for outstanding performers £3,000-£4,000 depending on grade • Shop Direct (Financial Services): Performance-related pay rises, with a 4% increase (uncapped) for a rating of 4, 2% (capped at the maximum of the grade) for a rating of 3, 1% for a rating of 2, with no increase for a rating of 1. Core award is 2%. Pay ranges increased in line with market data. www.LRD.org.uk 78 Blackfriars Road London SE1 8HF 19

20. (20) Working time & the employment package Aspects of paid working or non-working time were addressed in 13% of pay settlements in 2017. • OI Glass (Alloa): review overtime process/system (Union campaigning for overtime to be offered to OI staff first) • BMW (Rolls Royce Motor Cars): minimum notice before Saturday stand-up • Magna Exteriors (Halewood): 3% plus reduction in the working week from 39.5 hours to 38 hours with no loss of pay. Aspects of the employment package were affected in around 8% of pay deals in 2017 and if pension issues are included that total rises to 10%. www.LRD.org.uk 78 Blackfriars Road London SE1 8HF 20

21. (21) Post-recession high points Behind post-recession stability (medians of 2.0-2.5%), outcomes have been much more varied. Among 90 of the largest agreements, an average difference of over 4 percentage points between the largest and smallest basic rise, 3 points on the standard pay rise. Contributory factors included: • Timing of decisions about inflation-linking pay, and doing long-term deals • Securing a big “plus” element in any inflation-linked deal • Mixing and matching inflation links and pre-agreed increases • Breaking with “lump sum” settlements • Making the most of relevant labour market or trading conditions • Managing employer-driven changes (egg pay systems, anniversary dates) • Securing cash underpinning and general rather than selective pay rises www.LRD.org.uk 78 Blackfriars Road London SE1 8HF 21

22. (22) Factors that will help or hinder in 2018 • Inflation: timing of any fall (7 out of 10 deals effective January-April) • Labour market: employment/unemployment, skill & labour shortages • Statutory minimum wages: 4.4% NLW increase from April • Business activity: strong manufacturing, weakness in services? • Public sector pay policy: outcomes in April and later? • Gender pay gap: April reporting deadline – may impact on bargaining Example: In its agreement with PCS, Fujitsu promised discussions and action plans would follow when its Gender pay gap review was published, and would be reviewed quarterly. • Pension costs: rising minimum auto-enrolment contributions • Training costs: year 2 of the apprenticeship levy www.LRD.org.uk 78 Blackfriars Road London SE1 8HF 22