Press release

Expert analysis: How might pay change over the next three years?

We are in a period of significant change for pay levels, as the economy gradually picks up and the National Living Wage (NLW) comes into effect, writes Tim Knowles, Co-operatives UK's Head of HR services.

In the table below we set out average earnings, hourly average earnings, Retail Price Index and National Living Wage forecasts for 2016-2018.

  Average earnings Avergage hourly earnings Retail Price Index

National Living Wage

2016 3.6% 3.7% 2.2% 7.5%
2017 3.9% 4.2% 3.1% 5.8%
2018 3.9% 4.2% 3.2% 5.8%

Sources: OBR Economic & Fiscal Outlook July 2015; HM Treasury Economic Assessment Team August 2015; Co-operatives UK forecasts 2016 figure compared to 2015 NMW.

Medium term forecasting involves risk and members should adopt a prudent basis when developing their own provisions for pay in future budgets.

Settlements in recent years within the co-operative sector, particularly among retailers, have tended to be below RPI and are frequently below average earnings forecasts, which are often considered ambitious. Nonetheless, the NLW is likely to dictate pay settlements for low paid workers until at least 2020.

Leaving aside the National Living Wage, Co-operatives UK considers that median pay settlements for other groups of employees may be in the region of 2 to 2.5% in 2016, and 3% in 2017 and 2018.