Pay settlements in the three months to July remained at a steady average of three per cent, despite inflation reaching a two and a half-year high, according to Industrial Relations Services (IRS).

In addition, two-thirds of pay deals were lower than those received in 2005, only eight per cent were higher than the previous settlement.

IRS researchers collected information on 64 settlements covering 442,976 employees, 48 of which allow for an identifiable basic pay increase. The retail prices index (RPI) inflation measure stood at 3.3 per cent in July 2006.

Sheila Attwood, IRS Pay and Benefits editor, said: “Despite rising headline inflation, there are other factors at play keeping pay settlements at their current level of stability. These include a loosening labour market, and the impact of non-wage cost pressures on firms.

“As we enter the quieter end of the bargaining year, there are no signs of any upward pay pressures. Pay awards continue to be bunched around the 3 per cent mark, with more than half of awards worth less than a year ago, suggesting that employers are reigning back on their pay settlements.”