Around three-quarters (73%) of employees with a steady job have volatile pay or notable changes in monthly pay that can be attributed to more than just pay rises, promotions or bonuses, including at least one notable downward change in monthly pay, according to research by thinktank The Resolution Foundation.
Its Irregular payments: assessing the breadth and depth of month to month earnings volatility report analysed anonymised transaction data from more than seven million Lloyds Banking Group accounts. It also found that the average notable monthly increase in pay for employees remaining with the same employer throughout 2016-2017 was £530, while the average notable decrease in monthly pay was £290.
Less than one in 10 (9%) of employees who stayed with their employer throughout 2016-2017 had no months in which take home pay increased or decreased by more than 5%. Comparatively, 40% of employees with a steady job had notable pay changes that were not exclusively positive in six or more months of the year.
The research also found that more than 80% of employees in steady employment earning around £10,000 a year have volatile pay, compared to 66% of those who have an annual take home pay of around £35,000.
The average monthly pay change for employees with a steady job is more than 15% for those on the lowest earnings; this changes to 8% for employees earning around £17,500 a year. Employees who earn around £45,000 a year have an average monthly pay change of 12%.
Employees in a steady job with higher earnings, on average, have a positive pay change of £990 versus a negative pay change of £520. However, for employees on lower earnings in a steady job, upwards and downwards fluctuations are more consistent at £220 and £180 respectively.
Daniel Tomlinson, research and policy analyst at the Resolution Foundation, said: “We call for the Department for Work and Pensions [(DWP)] to investigate the impact of more-often-than-monthly pay packets on volatility and living standards. Monthly assessment periods are a core part of [universal credit’s] design and reducing their length may only act to increase volatility, making planning and budgeting even more challenging for those with volatile pay; it would also be a significant technical challenge. But it’s clear that the rigid adherence to monthly assessment periods is acting to introduce volatility in personal incomes in situations where pay is constant from month to month.
“Given that it makes little sense not to align assessment periods with pay periods where possible, reducing the lags between pay receipt and [universal credit] award payment, we also propose that the DWP should grant individuals already in work the flexibility to move their assessment period in order that it better reflects the dates on which they are paid.
“Further, and as we have called for elsewhere, it is clear that those on a zero-hours contract but who are in practice working regular hours should have the right to a regular contract. Similarly, we believe that employers should offer a minimum forward notice for changes to shift patterns.”