Despite two-thirds of employers planning to increase wages in 2011, one in four will maintain a pay freeze, the CIPD says
One in four employers are maintaining staff pay freezes this year despite the widening gap between wages and consumer price inflation, a survey reveals.
About two-thirds of employers have, or plan to, increase base pay in 2011. But a significant minority (26%) will freeze pay, while one in 10 are delaying their annual pay review. Encouragingly, almost all (99%) plan not to cut pay, according to the Chartered Institute of Personnel and Development's latest annual reward survey, which gathered responses from 280 businesses.
Charles Cotton, the CIPD's performance and reward adviser, said the results were unsurprising given the context of public sector spending cuts and cautious economic growth in parts of the private sector, and that the short- to medium-term picture was unlikely to change.
"We expect there will not be much change to the proportion of organisations making a pay award in 2012," Cotton said. "This is again due to a public sector that doesn't have much money to play around with as employers freeze pay, scrap bonus schemes and ask employees to pay more towards their pensions. Some private sector organisations will also find it hard to increase pay if their part of the economy does not grow as quickly as anticipated."
The TUC general secretary Brendan Barber said: "It is good news that two-thirds of employers will give their staff pay rises this year, but too many are still contemplating a freeze ? including most of the public sector. Continuing pay restraint squeezes incomes and threatens living standards, dragging down an already fragile economic recovery.
"The TUC is concerned that the overwhelming majority of recent pay deals have been below inflation ? making them pay cuts in real terms. Below-inflation pay rises reduce demand and could put a brake on the recovery. A real increase in wages in both the public and private sector is in everyone's interest."
Sector rates were considered the most important factor in determining pay levels for well over half of all respondents (60%), while the ability to pay was cited as the most important factor for one in four organisations.
At those employers that did offer salary increases, the report highlighted a growing move towards performance-related pay, with 61% citing that as the most common approach, either on its own or in combination with another factor, such as competencies.
Earlier this week the Engineering Employers' Federation reported that wage growth in the manufacturing sector had risen slightly during the first quarter of 2011, although it warned against premature optimism.
"Despite the small increase we are only returning to the level of settlements we would expect to see by historical standards," Lee Hopley, the EEF's chief economist said. "Economic uncertainty and the need for companies to control their costs in the face of global pressures continue to be the main driver of agreements."
Source: http://www.guardian.co.uk/money/2011/may/27/inflation-fails-sway-pay-chiefs
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