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Private sector salaries rising, but still a squeeze

Take home pay of private sector employees has improved over the last twelve month, but there is still some way to go to reach the pre-recession standard of earnings. This contrasts to a somewhat stagnant public sector.

According to the VocaLink FTSE 350 Take Home Pay Index, take-home pay in the private sector has risen by 1.6% from August to October, and 1.4% in the three months prior to that. This is a positive increase from the dismal 0.5% in May, but still not comparable to pre-recession levels and below consumer price inflation. Earning increases lower than inflation increases mean one thing – a squeeze on household budgets.

Pay freezes in the public sector for employees earning higher than £21,000 mean that the 1.3% growth in earnings reported in October will likely remain at that level for the next two years.

Although things are looking good for private sector employees in comparison with the public sector, inflation of 3.1% means that the squeeze will still be felt for some time. The VAT rise to 20% in January won’t make the situation any better. Nevertheless, at least there is growth and general confidence in a move out of recession helps to change consumer patterns. In the HR industry there are certainly plenty of jobs available.

The Take Home Pay Index is compiled using data captured by the automated payments processor from over 200 FTSE 350 companies and 600 public sector organisations. The data is analysed by the Centre for Economics and Business Research.