Earnings and employment from Pay As You Earn Real Time Information, UK: January 2021

• The number of payrolled employees in the UK in November 2020 fell by 2.8%, compared with the same period of the previous year.

• Early estimates for December 2020 indicate that the number of payrolled employees fell by 2.7% compared with December 2019, which is a fall of 793,000 employees.

• In December 2020, 828,000 fewer people were in payrolled employment when compared with February 2020.

• In December 2020, 52,000 more people were in payrolled employment when compared with November 2020.

• Median monthly pay increased by 4.7% in November 2020, compared with the same period of the previous year.

• Early estimates for December 2020 indicate that median monthly pay increased by 4.9%, compared with the same period of the previous year.

• Annual growth in payrolled employees in December 2020 was the highest in Cornwall and Isles of Scilly (a fall of 0.9%) and lowest in London as a whole (a fall of 5.5%).

• Annual growth in median pay for employees in December 2020 was highest in Northern Ireland (an increase of 7.2%) and lowest in the North Eastern Scotland (an increase of 3.3%).

• Annual pay growth in the UK for employees was highest at the 10th percentile (positive 6.7%) and lowest at the 75th percentile (positive 4.0%) in the three months to November 2020, for the percentiles we have analysed.

• The increase in payrolled employees between February and December 2020 was largest in the health and social work sector (a rise of 82,000 employees) and smallest in the accommodation and food services sector (a fall of 343,000).

• Annual growth in median pay for employees in December 2020 was highest in the arts and entertainment sector (an increase of 7.1%) and lowest in the accommodation and food services sector (a decrease of 4.2%).

About the data in this release

Early estimates for December 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 December 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. A revisions triangle is available for employees and median pay at the UK level.

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 November 2020, 28.1 million people were payrolled employees (Figure 1). This represents a 2.8% fall in payrolled employees when compared with the same period of the previous year. When comparing the number of payrolled employees in November 2020 with the previous month, the number decreased by 0.2%. This is a small revision from the early estimate of a 0.1% decrease, reported in the previous bulletin.

Early estimates for December 2020 indicate that there were 28.2 million payrolled employees, a fall of 2.7% compared with the same period of the previous year and a decline of 793,000 people over the 12-month period. Compared with the previous month, the number of payrolled employees increased by 0.2% in December 2020 -- equivalent to 52,000 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 past March 2020, (becoming negative in April 2020) coinciding with the coronavirus (COVID-19) pandemic.

Median monthly pay for payrolled employees in November 2020 was £1,920 (Figure 3). This represents a 4.7% increase compared with the same period of the previous year. This is a small revision to the early estimate of a 4.6% increase reported in the previous bulletin.

Early estimates for December 2020 indicate that median monthly pay increased to £1,930, an increase of 4.9% 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 4). 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, median pay growth has increased, and is now above pre-coronavirus levels.

The level of pay growth since June 2020 is partially explained by the decrease in inflows to payrolled employment over recent months, explored in the August and September bulletins. Whilst the general trend of pay growth is dominated by those continually employed, the mean pay of inflows tends to be around 40% lower than mean pay for those continually employed -- meaning inflows into payrolled 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 recorded pay growth is higher as a result.

In the three months to November 2020, the 10th percentile of the monthly pay distribution was £660, the 90th percentile was £4,562 and the 99th percentile was £13,069 (Figure 5). This means that 10% of payrolled employees earned equal to or less than £660 per month, 90% earned equal to or less than £4,562, and 99% earned equal to or less than £13,069.

Compared with the same time a year ago, of the percentiles we have analysed, pay growth was highest at the 10th percentile (positive 6.7%) and lowest at the 75th percentile (4.0%).

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 6 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). From mid-2018 to mid-2020, the 10th percentile and the median grew at broadly the same pace, so their ratio remained broadly constant. In line with the rest of this bulletin, Figure 6 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 since September 2014, 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, with a slight downward trend.

Periods since February 2020 have shown more volatility, around the time of the coronavirus (COVID-19) pandemic. While pay growth (relative to median pay) around May 2020 was lower at the 10th percentile and higher at the 90th percentile, these movements appear to have now reversed and appear to be returning to their former trends.

The regional figures in this bulletin are based on where employees live and not the location of their place of work. They include data for December 2020, and cover Nomenclature of Territorial Units for Statistics: NUTS1 and NUTS2 regions.

While the UK as a whole has experienced moderate, if declining, payrolled employee growth since January 2017, growth within regions has not been uniform (Figure 7).

Numbers of payrolled employees in the UK for the regions shown in Figure 7 range from 742,000 in Northern Ireland to 3,979,000 in the South East in December 2020.

Figure 7: Regional employee growth has fallen across the UK in recent months

Percentage change on same month in previous year, seasonally adjusted, UK, January 2017 to December 2020

Notes:

1. The latest period is based on early data and therefore is more likely to be subject to slightly more significant revisions.

Data download

London and Northern Ireland experienced higher growth than the UK average between January 2017 and early 2020, while the North East and Scotland experienced lower growth than the UK overall. Going further, since January 2019 Inner London (both West and East) experienced greater volatility in employee growth than both Outer London and the UK average.

Since February 2020, all regions’ growth rates followed a similar pattern: rapidly declining and becoming negative in April, and continuing a slower downward trend since. However, the magnitude of changes varies. Comparing December 2020 with the same period of the previous year for NUTS1 regions, decreases in payrolled employees ranged from 1.0% in Northern Ireland to 5.5% in London. Examining NUTS2 regions, Inner London generally experienced sharper decreases in 2020 than Outer London (Figure 8). North Eastern Scotland experienced a decrease of 5.3% in payrolled employees in comparison with December 2019, and Cornwall and Isles of Scilly experienced a decrease of 0.9%.

Figure 8: Growth in payrolled employees varies across the UK

Percentage change on same month in previous year, seasonally adjusted, UK, December 2020

Notes:

1. The latest period is based on early data and therefore is more likely to be subject to slightly more significant revisions.

Data download

Of the 828,000 decrease in payrolled employees since February 2020, 229,000 can be attributed to employees living in London, 117,000 in the South East, while only 10,000 can be attributed to employees living in Northern Ireland.

Median pay across the UK in December 2020 ranged from £1,650 in Cornwall and Isles of Scilly to £2,337 in London as a whole. Inner London generally differs from Outer London (Figure 9).

Figure 9: Median pay varies across the UK

Median pay, seasonally adjusted, UK, December 2020

Notes:

1. The latest period is based on early data and therefore is more likely to be subject to slightly more significant revisions.

Data download

Compared with the same time last year, pay grew fastest for the NUTS1 regions in Northern Ireland (positive 7.2%) and slowest in the North East (positive 4.1%) (Figure 10). Over the longer-term, on average over the past five years, pay growth was highest in Northern Ireland (at an annualised rate of positive 3.7%) and slowest in the North East (positive 3.1%). Estimates of mean pay for the regions are available in the datasets published alongside this bulletin.

Figure 10: Median pay increased most in Northern Ireland

Percentage change on same month in previous year, seasonally adjusted, UK, December 2020

Notes:

1. The latest period is based on early data and therefore is more likely to be subject to slightly more significant revisions.

2. Changes in growth rates are affected by changes in the base period (a year ago) as well as changes in the latest period.

Data download

Early estimates are available for the industry information. The figures include data for December 2020.

The industrial sectors in this bulletin are based on the UK Standard Industrial Classification (SIC) codes, as defined by the Office for National Statistics (ONS). These codes have been determined from both the Inter-Departmental Business Register and data from Companies House for each Pay As You Earn (PAYE) enterprise. The findings from the 14 largest sectors are presented. The seven smaller sectors have been removed from the bulletin for presentational purposes, but their estimates are available in the datasets published alongside this bulletin.

The three largest sectors namely: wholesale and retail, health and social work, and education, account for more than 40% of UK employees. These three sectors combined with administrative and support services, manufacturing, professional, scientific and technical, and accommodation and food services account for more than 70% of UK employees (Figure 11).

Since January 2017, employee growth has not been uniform across sectors (Figure 12). Sectors such as construction, transportation and storage, and information and communication experienced higher growth than the UK average between January 2017 and early 2020, while sectors such as manufacturing, and wholesale and retail experienced lower growth than the UK overall.

All sectors highlighted experienced a decrease in employee growth around April 2020, with the smallest decrease being in health and social work.

Some sectors (such as administrative and support services) have partially recovered since April 2020 but with employment still below the levels in the same month in the previous year. Only public administration and defence, health and social work, and education have returned to a level of positive growth.

Sectors such as finance and insurance, and education have had steep declines in employee growth around April 2020, with numbers slowly recovering. This results in small net changes in payrolled employees in the past 12 months for these sectors.

Many of the remaining sectors have seen increasingly negative growth since April 2020, with the greatest change being in arts and entertainment, and accommodation and food services.

When compared with the same period of the previous year, percentage changes in payrolled employees range from negative 16.6% in accommodation and food services to positive 2.7% in health and social work. Arts and entertainment has experienced a fall in employees of 16.3%.

Figure 12: Employee growth has been very different across sectors

Percentage change on same month in previous year, seasonally adjusted, UK, January 2017 to December 2020

Notes:

1. The latest period is based on early data and therefore is more likely to be subject to slightly more significant revisions.

Data download

Of the 828,000 decrease in payrolled employees since February 2020, 343,000 can be attributed to employees working in the accommodation and food services sector, 166,000 in the wholesale and retail sector, while only 10,000 can be attributed to employees working in the construction sector. This decrease is net of an increase of 2,000 employees working in education, 34,000 employees working in public administration and 82,000 employees in health and social work (Figure 13).

Median pay in December 2020 across the highlighted sectors ranged from £1,015 in the accommodation and food services sector to £3,056 in finance and insurance (Figure 14).

Compared with the same time last year, median pay grew fastest in the arts and entertainment sector (positive 7.1%) and slowest in the accommodation and food services sector (negative 4.2%) (Figure 15). Estimates of mean pay for each sector are available in the datasets published alongside this bulletin.

However, care needs to be taken when interpreting median pay growth. As explored in more detail in previous bulletins, mean and median pay growth are influenced by the relative pay of those entering and leaving the labour market. For the UK labour market as a whole, employees both entering and leaving the labour market are on average lower paid than other employees. This means recent outflows have had a more positive effect on pay growth overall than they usually would. This may explain the larger than average median pay increase for some sectors that have seen a significant recent decrease in employee numbers, such as arts and entertainment. However, this would not explain the decrease in median pay in sectors such as accommodation and food services that have seen a comparable decrease in employee numbers. This may be a reflection of the relative pay of inflows and outflows in those sectors compared with those in continuous employment.

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 payrolled. 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 payrolled 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 December 2020 and are seasonally adjusted.

Upcoming changes

Future bulletins are planned to include additional statistics, such as more detailed geographic breakdowns, industry and demographic 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.

Pre-release data

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 statistical publications and 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 are able to use these to produce estimates for geographic areas and other more detailed breakdowns of the population. 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 January 2021, which means around 1% to 2% of the data for November 2020 are imputed, while around 15% of the data for the "flash" December 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.

Starting with the December 2020 publication, we introduced a revisions policy. For each publication, we incorporate new input data only for the latest two tax years. In May of each year, new input data will be incorporated for the whole data time series. The benefit of introducing this revisions policy is that we are able to use the processing time saved to produce and publish more detailed breakdowns.

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 Earningscan be found in an accompanying article.

Another article shows the strengths and weaknesses of these sources and other labour market data sources, including the advantages of new administrative data sources and limitations of some of our published figures.