LONDON (Reuters) - Pay awards by British employers held at 4% for a fifth month in a row in August, well below annual inflation of close to 10%, data from human resources company XpertHR showed on Wednesday, giving a more muted picture than some other measures of wages.
The Bank of England is concerned that high inflation - which hit a 40-year peak in July - could become entrenched at a level above its 2% target if it leads to a lasting upward shift in typical pay deals.
Stopping this process is one reason why the BoE raised rates by half a percentage point in August - its biggest rate rise since 1995 - and may consider a three-quarter-point move when it announces its next decision on Thursday.
Before this year, pay deals were last as high as 4% in 1992. However, XpertHR said pay deals were much bigger in 1990, the last time inflation was near current levels, when the median pay deal stood at 9.4%.
"While inflation dipped very slightly this month, the consensus remains that we're by no means out of the woods and employees will continue to see a real-terms pay cut," XpertHR pay and benefits editor Sheila Attwood said.
The rise in pay settlements is less than the 5.2% annual increase in average earnings excluding bonuses recorded by the Office for National Statistics in the three months to July.
The ONS measure also captures pay rises caused by changes in the shape of the workforce, promotions and job changes.
The BoE also conducts its own surveys, which last month showed businesses expected to raise pay by around 6% over the coming year - well above pre-pandemic norms of 3-4%.
XpertHR's data is based on the median pay settlement across 99 deals reached in the three months to the end of August, which affected more than 1 million workers. Pay deals averaged 4% in the services sector and 3.5% in manufacturing.
Looking at the 12 months to the end of August, the median pay deal was 3% in the public sector and 3.7% in the private sector, the narrowest gap since December.
(Reporting by David Milliken, editing by Andy Bruce)