Unconsolidated pay increases

An important principal for trade unions is that any pay awards should be consolidated into basic pay. Employers avoid this when awarding one-off lump sum cash payments instead of a consolidated increased. Such unconsolidated rewards mean that the basic pay rate does not alter from one year to the next. This could mean that the overall amount of pay received by employees in the organisation could actually decrease the following year if a similar lump sum is not awarded on top of the basic rate. It also means that, unless the inflation figure has dipped below zero, the basic pay rate will have fallen further behind increases in the cost-of-living, and a basic pay rise equivalent to cost-of-living increases over two years will be needed in order for employees to catch-up.

An additional problem with unconsolidated increases is that the pay received is not normally included in calculations for pension entitlements, redundancy pay, maternity pay and other payments linked to earnings. However, some pay settlements do include provision for unconsolidated awards to be included in the calculations for pensions and other entitlements.