Earnings and employment from Pay As You Earn Real Time Information, UK: August 2020

• The number of paid employees in the UK in June 2020 fell by 1.8%, compared with the same period of the previous year.

• Early estimates for July 2020 indicate that the number of paid employees fell by 2.2% compared with July 2019.

• In July 2020, 114,000 fewer people were in paid employment when compared with June 2020 and 730,000 fewer people were in paid employment when compared with March 2020.

• Median monthly pay increased by 1.1% in June 2020, compared with the same period of the previous year.

• Early estimates for July 2020 indicate that median monthly pay increased by 2.5%, compared with the same period of the previous year.

• Growth in median pay for employees in the three months to June 2020 was highest in Northern Ireland (positive 0.8%) and lowest in the West Midlands (negative 0.3%).

• Pay growth in the UK for employees was highest at the 95th percentile (positive 0.5%) and lowest at the 99th percentile (negative 0.9%) in the three months to June 2020, for the percentiles we have analysed.

About the data in this release

Early estimates for July 2020 are provided to give an indication of the likely level of employees as well as median pay in the latest period. The figures for July 2020 are based on around 85% of information being available and are considered of lower quality and may be subject to revision in next month's release when between 98% to 99% of data will be available. This work has been brought forward in response to the coronavirus (COVID-19) and methods will continue to be developed.

This release covers people paid through the Pay As You Earn (PAYE) system where their pay is reported through the Real Time Information (RTI) system. As employees who are "furloughed" as part of the Coronavirus Job Retention Scheme (CJRS) programme should still have their payments reported through this system, they should feature in these data and contribute toward the employment and pay statistics for the relevant periods.

Statistics in this release are based on people who are employed in at least one job paid through PAYE, and monthly estimates reflect the average of such people for each day of the calendar month. This follows the introduction of a new methodology in December 2019, designed to better align with international guidelines for labour market statistics. This differs from the methodology used prior to December 2019, which produced statistics based on the total number of people paid in a particular time period.

In June 2020, 28.4 million people were paid employees (Figure 1). This represents a 1.8% fall in paid employees when compared with the same period of the previous year. When comparing the number of paid employees in June 2020 with the previous month, the number fell by 0.1% – a slight revision from the 0.3% fall estimated by the previous bulletin.

Early estimates for July 2020 indicate that there were 28.3 million paid employees, a fall of 2.2% on the same time in the previous year and a decline of 627,000 people. Compared with the previous month, the number of paid employees fell by 0.4% in July 2020 – equivalent to 114,000 people.

Annual growth in the number of employees remained broadly within a range of 1.0% to 1.5% until 2019, following higher rates of growth prior to mid-2016 (Figure 2). Starting around early 2019, employee growth began a slight downward trend. However, employee growth slowed more substantially recently (becoming negative in April 2020) coinciding with the coronavirus (COVID-19) pandemic as well as related economic and policy responses.

Declines in the number of paid employees in recent months can be explained by examining inflows and outflows from payroll employment. For any time period, net changes in the number of paid employees can be decomposed into inflows (people who were not in paid employment in a previous period but are in the current period) and outflows (people who were in paid employment in a previous period but are not in the current period).

For most of the years prior to February 2020, outflows and inflows were broadly equal – with inflows being slightly higher, resulting in a net increase in paid employment (Figure 3). Between January 2017 and December 2019 in the UK, inflows averaged 670,000 and outflows averaged 645,000 per month, with a resulting average increase in paid employment of 25,000 per month.

While paid employment has fallen in the past five months, the changes in inflows and outflows driving this fall have differed. The fall in paid employment in April 2020 was (broadly) equally because of an increase in outflows and a fall in inflows compared with their pre-coronavirus trends. However, the pattern of outflows was different in May, June and July 2020.

Since then outflows have fallen and remained below their pre-coronavirus level. Inflows have remained below pre-coronavirus levels in all four months. As a result, the fall in paid employment in the latest three months can be explained primarily through lower than usual inflows rather than higher than usual outflows.

In interpreting these trends, it is important to note that outflows consist of people both voluntarily and involuntarily leaving paid employment, and inflows similarly consist of employers replacing people who have left and creating new employments. It is not possible to distinguish these different circumstances using the Real Time Information (RTI) data. Therefore, care needs to be taken not to interpret the outflows in terms of either voluntary or involuntary changes individually.

In addition, recent data periods are subject to increased levels of imputation and so should be treated as experimental and with caution. Testing to date indicates there may be a slight bias toward both inflows and outflows being revised down slightly over time, by roughly equal amounts – but the scale of these revisions should not impact the broad analysis presented in this bulletin.

Median monthly pay for employees in June 2020 was £1,830 (Figure 4). This represents a 1.1% increase when compared with the same period of the previous year. This is a slight revision to the early estimate of a 1.0% increase in June 2020 reported in the previous bulletin.

Early estimates for July 2020 indicate that median monthly pay increased to £1,864, an increase of 2.5% when compared with the same period of the previous year.

Following a general trend of increasing pay growth between mid-2015 and mid-2018, pay growth tended to fluctuate around 3.6% (Figure 5). Pay growth for April and May 2020 became negative, coinciding with the coronavirus (COVID-19) pandemic as well as related economic and policy responses. More recently, pay growth has increased, but is still lower than pre-coronavirus levels.

The level of pay growth in July 2020 (close to its average in 2016 to 2017) is partially explained by the decrease in inflows to paid employment, explored in an earlier section of this bulletin. The mean pay of inflows tends to be around 40% lower than mean pay for those continually employed – meaning inflows into paid employment tend to bring down average pay and average pay growth. As inflows have fallen in recent months, this downward pressure on pay growth is reduced, and pay growth is higher as a result.

The regional figures in this bulletin are based on where employees live and not the location of their place of work. They are also based on three-month moving averages. Median pay across regions and nations of the UK in the three months to June 2020 ranged from £1,681 in Northern Ireland to £2,189 in London (Figure 6).

Compared with the same time last year, pay grew fastest in Northern Ireland (positive 0.8%) and slowest in the West Midlands (negative 0.3%) (Figure 7). Over the longer-term, on average over the past five years, pay growth was highest in the East of England (at an annualised rate of positive 2.4%) and slowest in the North East (positive 2.1%).

In the three months to June 2020, the 10th percentile of the monthly pay distribution was £608, the 90th percentile was £4,360 and the 99th percentile was £12,185 (Figure 8). This means that 10% of paid employees earned equal to or less than £608 per month, 90% earned equal to or less than £4,360, and 99% earned equal to or less than £12,185.

Compared with the same time a year ago, of the percentiles we have analysed, pay growth was highest at the 95th percentile (positive 0.5%) and lowest at the 99th percentile (negative 0.9%).

When interpreting changes in the distribution over time, it can be useful to compare the level of percentiles relative to the median (that is, the amount of earnings in the middle of the distribution so that half of employees earn more and half earn less).

Figure 9 divides each percentile by the median and then indexes these to 100 at the start of the series to better focus on their movements over time. Growth in these series reflects a percentile growing faster than median pay, while a fall in these series reflects a percentile growing slower than median pay.

The 10th and 25th percentiles of employees’ pay have generally grown faster than median pay over the past five years, coinciding with the introduction of, and increases to, the National Living Wage (NLW). However, since mid-2018, the 10th percentile and the median have grown at broadly the same pace, so their ratio has remained broadly constant. In line with the rest of this bulletin, Figure 8 includes only employees’ pay and not other income such as from self-employment.

The ratio of the 90th percentile to the median has generally fallen, reflecting pay towards this high end of the distribution growing slightly slower than median pay. When focusing even further towards the high end of the distribution, pay at the 99th percentile has grown at a broadly similar pace to median pay.

Recent periods have shown more volatility, around the time of the coronavirus (COVID-19) pandemic. While pay growth (relative to median pay) around April 2020 was lower at the 10th percentile and higher at the 90th percentile, these movements are less prevalent more recently – or may have partially reversed.

Median monthly pay

Median monthly pay shows what a person in the middle of all employees would earn each month. The median pay is generally considered to be a more accurate reflection of the “average wage” because it discounts the extremes at either end of the scale.

National Minimum Wage and National Living Wage

The National Minimum Wage (NMW) is a minimum amount per hour that most workers in the UK are entitled to be paid. There are different rates of minimum wage depending on a worker’s age and whether they are an apprentice. The NMW applies to employees aged between 16 and 24 years. The government’s National Living Wage (NLW) was introduced on 1 April 2016 and applies to employees aged 25 years and over.

On the Annual Survey of Hours and Earnings (ASHE) reference date in April 2020, the NMW and NLW rates were:

• £8.72 for employees aged 25 years and over

• £8.20 for employees aged 21 to 24 years

• £6.45 for employees aged 18 to 20 years

• £4.55 for employees aged 16 to 17 years

• £4.15 for apprentices aged 16 to 18 years and those aged 19 years or over who are in the first year of their apprenticeship

Pay As You Earn

Pay As You Earn (PAYE) is the system employers and pension providers use to take Income Tax and National Insurance contributions before they pay wages or pensions to employees and pensioners. This publication relates to employees only and not pensioners. It was introduced in 1944 and is now the way most employees pay Income Tax in the UK.

Data source and collection

The data for this release come from HM Revenue and Customs' (HMRC's) Pay As You Earn (PAYE) Real Time Information (RTI) system. They cover the whole population rather than a sample of people or companies, and they will allow for more detailed estimates of the population. The release is classed as Experimental Statistics as the methodologies used to produce the statistics are still in their development phase. As a result, the series are subject to revisions.

Coverage

This publication covers employees paid by employers only. It does not cover self-employment income or income from other sources such as pensions, property rental and investments. Where individuals have multiple sources of income, only income from employers is included.

The figures in this release are for the period July 2014 to July 2020 and are seasonally adjusted.

Upcoming changes

Future bulletins are planned to include additional statistics, such as more detailed geographic breakdowns. The focus and timing of these will be informed by user feedback. Please email rtistatistics.enquiries@hmrc.gov.uk if you would like to offer feedback on how the contents can be improved in the future.

Methodology

An accompanying article contains more information on the calendarisation and imputation methodologies used in this bulletin, alongside comparisons with other earnings and employment statistics and possible quality improvements in the future.

HM Revenue and Customs (HMRC) grants pre-release access to official statistics publications. As this is a joint release, and in accordance with the HMRC policy, pre-release access has been granted to a number of people to enable the preparation of a ministerial briefing. Further details, including a list of those granted access, can be found on HMRC's website.

Experimental Statistics status

This is a joint experimental release between HMRC and the Office for National Statistics (ONS). The existing monthly publications produced by the ONS remain the primary National Statistics for the labour market. The intention is that these new statistics will also be updated on a monthly basis.

The release is classed as Experimental Statistics as the methodologies used to produce the statistics are still in their development phase. This does not mean that the statistics are of low quality, but it does signify that the statistics are new and still being developed. As the methodologies are refined and improved, there may be revisions to these statistics.

Rather than waiting until the development work has been completed, the statistics are being published now to involve potential users in developing the statistics. We hope that this encourages users to provide us with their thoughts and suggestions on how useful the statistics are and what can be done to improve them. Comments can be sent by email to rtistatistics.enquiries@hmrc.gov.uk.

More information about Experimental Statistics, including when they should be used and the differences between them and National Statistics, is available.

Strengths of the data

As Pay As You Earn (PAYE) Real Time Information (RTI) data cover the whole population, rather than a sample of people or companies, we will be able to use these to produce estimates for geographic areas and other more detailed breakdowns of the population. At the moment, the methods for producing such breakdowns are under development and we expect to include further statistics in a future release. These statistics can help inform decision-making across the country. They also have the potential to provide more timely estimates than existing measures.

These statistics also have the potential to replace some of those based on surveys, which could reduce the burden on businesses needing to fill in statistical surveys.

Imputation and revisions

A limitation of the calendarisation used is that the figures for pay and numbers of employees in month t depend on payments made in month t plus 1. This means only around 80% of the data used in the calculation on month t statistics are available at the end of each month.

Rather than wait until all those remaining payment returns have been received, we have decided to produce a timelier measure of numbers of employees and median pay by imputing the values for missing returns. The data on which the statistics are based were extracted at the beginning of July 2020, which means around 1% to 2% of the data for June 2020 are imputed, while around 15% of the data for the "flash" July 2020 data are imputed. As a result, the figures in future releases will be updated as new payment returns are received, and the imputation payments can be replaced with actual data.

Differences compared with the Labour Force Survey and Average Weekly Earnings statistics

Further information about the methodology used and comparisons with the ONS's Labour Force Survey (LFS) and Average Weekly Earnings can be found in an accompanying article.