Employers looking to freeze pay

23 June 2009

Over a half of employers are planning to keep wages on hold during the next round of pay talks, a new survey has indicated.

According to the CBI's latest labour market survey, 55 per cent of respondents said that they would be pegging wages at their current levels as a way of dealing with the recession. Some 4 per cent intend to introduce wage cuts.

Of the 700 firms that took part in the survey, 30 per cent of employers have stopped taking on new staff, while 31 per cent have imposed a partial halt to recruitment.

There has, however, been a significant upturn in the numbers of firms that are implementing more flexible working practices as businesses battle the downturn.

Two out of five firms (45 per cent) have increased flexible working among staff to reduce hours, and a further 24 per cent are considering or intending to make increases.

In response to falling demand, a third (33 per cent) of employers have reduced their use of agency staff, while 43 per cent have cut down on paid overtime.

Nine out of ten firms reported they would be introducing no changes to their redundancy packages because of the recession. The average redundancy payment was just over £12,100, although the differing sizes of individual businesses have meant there have been large variations in the level of redundancy deals: redundancy pay was £23,700 in firms with more than 5,000 staff, and £5,200 among the smallest businesses.

Almost a half of firms (47 per cent) are maintaining their training budgets, but nearly as many (44 per cent) are looking to shave staff development funds to save money.

The vast majority of employers in the survey (87 per cent) urged the government to improve the liquidity of the credit markets, and two thirds voted for a moratorium on all new employment regulation until the economy recovers.

John Cridland, the CBI's deputy director-general, said: "This has been a particularly bruising recession, but one of its most positive and striking aspects has been the commitment of many businesses and their staff to work together to try to trim costs and save jobs.

"The UK's flexible labour market has proved a huge asset during these testing times, and flexible working changes have enabled employers and staff to create leeway on working hours."

Mr Cridland added: "While pay and recruitment freezes should disappear as the economy recovers, the spirit of flexibility and the willingness of many staff to engage positively with employers on these issues will hopefully be a more permanent benefit of the UK economy."