Real salaries shrinking by 1% a year: pay rising at slowest rate in two years and well below the rate of inflation

The average real UK salary is shrinking by nearly 1 per cent a year as the rate of shop inflation more than wipes out meagre pay increases, research reveals.



Median basic pay rises in the three months to October were 1.8 per cent on the same period a year earlier, according to XpertHR.



That's the lowest level of wage increase for over two years, and is dwarfed by the October rate of consumer price inflation at 2.7 per cent - although inflation in the preceding two months had been slightly lower.



British workers are seeing their real incomes diminish

The study of almost 100 settlements found the first increase in the gap between pay rises and inflation since April.



Employers are predicting slightly higher pay awards next year of 2.5 per cent, said the report.



Sheila Attwood of XpertHR said: 'Respondents to our survey reported that controlling paybill costs will be a top priority over the next year, and our latest figures on pay settlements reflect this in practice.



'The dip in the level of pay settlements comes as some companies continue to freeze pay, while those at the top end of the range also remain cautious in their increases - just 8 per cent of pay awards in our latest sample are worth more than 3 per cent, compared with 58 per cent over the same period in 2008, just before the start of the recession.



'We see continued caution in pay setting over the coming year, with 2.5 per cent the expected benchmark pay award.'



ONS figures yesterday also showed real wages were shrinking earlier in the year

The study confirms official data yesterday, which showed that the median gross weekly pay packet was £506 in April 2012, just 1.5 per cent higher than the 2011 figure of £498.



The official inflation rate was 3 per cent in April. The Office for National Statistics said the below-inflation rise took the average full-time wage to £26,500.



The figures also showed that the difference between the hourly rates of pay for men and women in full-time work, excluding overtime, fell from 10.5 per cent to 9.6 per cent of the average man's wage.



The median gross annual earnings were £28,700 for men, up 1.2 per cent, and £23,100 for women, up 2.0 per cent.



The pay gap is bigger when you include part-time work but still fell in the past year, down from 20.2 per cent to 19.7 per cent. The higher figure is affected by more women in part-time jobs, which tend to have lower rates of pay, said the ONS.

The UK inflation rate had been on a downward trend until recently

Recent research from accountancy group PricewaterhouseCoopers revealed how different income groups experience varying rates of inflation.

It found that the richest and poorest households are facing the biggest squeeze from inflation, while some in the middle are escaping the worst of the rises.



The richest ten per cent of households faced an inflation rate of 2.95 per cent in the year to October - greater than the official 2.7 per cent rate - because of their high exposure to the rise in tuition fees.

Higher food prices and energy bills mean the poorest ten per cent of households suffer the second-highest rate of inflation, 2.8 per cent, according to PwC.