Why falling inflation might mean pay freezes all round

To say that the reward landscape has changed immeasurably in the past year would be an understatement. Amid the grim economic news, the latest landmark came last week when retail prices index (RPI) inflation, the measure commonly used by employers as a pay benchmark, hit zero. With this standard bargaining point used by unions removed, the spectre of deflation and employers feeling the chill in so many sectors, it is no surprise that pay freezes are becoming the norm.But if zero RPI suggests a static or declining cost of living, this picture was confused when it was revealed that the alternative measure of inflation, the consumer prices index (CPI), rose to 3.2 per cent. So what is going on, and what are the implications for HR professionals carrying out pay reviews?