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Pay rises that are really pay cuts for 2011

Cost of living rising faster than salaries

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Pay rises in 2011 are likely to be better than last year – assuming the recovery continues – but your pay is likely to increase less than the cost of living.

Helped by yesterday's 2.5 per cent increase in VAT, the rise in the cost of living is likely to outpace salary growth for the second year running.

Figures from Incomes Data Services found median awards in the last quarter of 2010 were 2.2 per cent – a slight increase on the 2 per cent increase for the previous three quarters. The numbers come from 66 pay reviews covering 1.9 million employees.

More than half of typical settlements were between 2 and 2.99 per cent. The number of pay freezes is the lowest since the end of 2008.

Ken Mulkearn, editor of IDS Pay Report, which crunches the numbers for IDSPay.co.uk, said: "Private sector pay settlements could well rise in 2011, under the influence of higher inflation and the tentative economic recovery. But the increase in the cost of living, especially after rail fare rises, and the increase in VAT to 20 per cent, means that most employees’ pay will be chasing inflation."

Public sector pay rises are in even worse shape. The median rise for the year was 0.75 per cent – and is expected to fall further in 2011. IDS researchers found pay freezes at 10 civil service departments.

In other news, the GMB trade union warned that central government cuts will lead to the loss of 200,000 local council jobs in the coming year. Brian Strutton, national officer at the GMB, told the BBC that 150,000 directly employed council staff and 50,000 employed on council work via agencies or as contractors would lose their jobs.

Strutton predicted councils would rush through their redundancies before the end of March, when the 2010 financial year comes to a close. ®

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