Take home pay rises further in June, according to Voca
- Voca index mirrors retail sales figures
- Fatter pay packets may lead to inflationary pressure
5 July 2006: The Voca take home pay index shows growth in take home pay rising to 5.2 per cent in June from 4.0 per cent in May. The index, which is based on a three month moving average, has risen for the second consecutive month after four consecutive months of decline.
Both Voca sub-indices for the industry and service sector continue to strengthen at an increasing rate, prompting the overall increase in take home pay growth. The Voca industry index rose to 4.9 per cent in June from 3.1 per cent in May. The services index rose to 5.5 per cent in June from 4.7 per cent in May.
The rising index reflects the increase in take home pay resulting from the fall in tax and National Insurance contributions from 6.0 per cent in April to 4.7 per cent in May.2 The index also continues to show a close correlation between take home pay and comparable official retail sales data.
Richard Cooper, head of marketing and communications at Voca, said:
“This month’s increase in take home pay continues last month’s turnaround. The services index is now at a twelve month high of 5.5 per cent whilst the industry index continues its strong recovery from a low of just 1.7 per cent in April to the current level of 4.9 per cent.”
Douglas McWilliams, chief executive of cebr, the economics consultancy which analyses the index for Voca, commented:
“Given the correlation between the Voca take home pay index and retail sales figures, the latest rise in the Voca take home pay index indicates that the improving trend in retail sales will continue on its upward path. However, higher take home pay could feed through to inflationary pressure in the coming months. But we believe that there will not be a rise in interest rates this year while the longer term growth prospects remain uncertain.”
Voca processes over 90 per cent of UK salaries and the Voca take home pay index is the most timely and accurate disposable income data available in the UK. It is based on actual payments made to employees on a three-month moving average compared with the same measure a year earlier. It is affected by changes in tax rates, National Insurance and other employer payments or deductions.
To read the full take home pay index report, please click here.