The VocaLink Take Home Pay Index reveals that private sector take home pay is currently at a six month high, showing annual growth of 1.0% in the three months to the end of March. This is the fastest growth of the FTSE 350 Take Home Pay Index since September 2012.
Much of this private sector growth was driven by annual take home pay strength in the VocaLink Manufacturing Sector Index, which grew to 2.9% in the three months to March. However, the latest ONS figures show a decline in manufacturing output between December and January. This decline, coupled with the ongoing Eurozone economic weaknesses, suggests the recovery in the manufacturing sector is unlikely to be sustained.
The VocaLink Services Take Home Pay Index remains broadly unchanged in the three months to the end of March, sitting at 0.7%. This index has grown at about this rate for the last six months and is expected to continue growing at a similar pace for the foreseeable future. Likewise, the VocaLink Public Sector Take Home Pay Index, which has fluctuated below 1.0% growth since April 2012, failed to grow in the three months to the end of March, with annual growth in the index of 0.0%.
Following last month’s Budget announcement that the public sector pay freeze will continue to limit pay increases to an average of 1% until 2015/16, the VocaLink Public Sector Take Home Pay Index is not likely to see its growth rate improve in the short or medium term.
Commenting on this month’s findings, David Yates, Chief Executive Officer at VocaLink, said: “Today’s VocaLink Take Home Pay Index findings, showing growth in private sector take home pay at its highest rate since September 2012, will be welcome news to employees. However, take home pay growth is still overshadowed by the rate of inflation and this could continue to put pressure on workers’ disposable incomes in the months ahead.”
Douglas McWilliams, Chief Executive of Cebr, said: “Despite relative improvements in the annual growth of take home pay in the private sector, workers’ wage growth remains fragile. March 2013 pay growth is weaker than the 1.7% growth achieved in March 2012 and has been much weaker through the first quarter of 2013 than the same period last year. With economic growth forecasts low, particularly in the manufacturing sector, it is likely that workers’ wages will continue to struggle.”
The VocaLink Take Home Pay Indices track monthly take home pay levels in the UK. They are compiled using data captured by VocaLink from the salary payments of over 200 FTSE 350 companies and over 600 public sector organisations. VocaLink is the processor for automated payments in the UK including all Direct Debit and Bacs Direct Credits, which account for over 90 per cent of salary payments delivered into employees’ bank accounts.
For more information, please visit VocaLink’s website.