With the Retail Price Index year on year increase still running at 2.4%, confirmation has now been reached with the Co-operative Group that the NACO pay deal effective from 3 April 2006 is 3.5%. This will be applied as a general increase for those on Role Bands 3, 4 and 5 and in the form of performance-related pay for those on Role Bands 1 and 2. For those in Role Bands 1 and 2, the poor or unsatisfactory performance rating will mean a 0% pay award (although past practice indicates that the actual numbers will be in single figures), "satisfactory" will be in a 2.5% to 3.5% range, while outstanding/exceptional performance can be rewarded up to 6% conditional upon position within the salary range. For Role Bands 3, 4 and 5, the 3.5% will be applied across-the-board.

Given the difficult year that the Group has experienced in 2005, bonus distribution is likely to be replaced by limited ex-gratia payments which will not be confined to Role Bands 1 and 2.