Pay freeze begins to thaw - but workers no better off

Employees may be starting to see their wages rise again, but unfortunately, it's still below the rate of inflation...

by Emma Haslett
Last Updated: 26 Oct 2010
When is a pay rise not a pay rise? It’s a question thousands of workers have been grappling with lately, as those pay-rises they’ve been promised have, in actual fact, come in well below inflation. In fact, according to a new study, a third of employers can’t afford to give their workers more than a 2% pay rise - that's less than the average for 2009, when the country was still officially in recession. And, with that Government spending review looming, things may yet get even tougher…

The research, by IDS Pay, has mixed news for workers: while just 7% of the 300 businesses surveyed between January and September have implemented a pay freeze for two years on the trot, the typical pay rise was just 2% - which works out at less than two-thirds of inflation, currently standing at 3.1%. That’s not particularly encouraging to workers, who, far from reaping the benefits of a pay rise, are effectively seeing their monthly income drop. Although things are looking a little more promising for the services and manufacturing sectors, where the average has risen to about 3%.

Still, it's all relative. Indications are that while employees aren’t necessarily happy with the situation, they’d rather accept a pay freeze or a low pay rise than be out of a job. That might not be particularly good for workers, but it's better news for their employers, who can at least count on a certain degree of loyalty (though scaring employees into staying in their job isn’t exactly HR best practice). And if they can't afford to give people above-inflation pay rise, the least they can do is explain exactly why; according to Ben Wilmott of the Chartered Institute of Personnel and Development in the Telegraph, transparency is crucial: ‘People are more likely to accept tough and unpopular decisions if they feel their employer is being completely honest with them.’

The question is: can we expect things to improve any time soon? Certainly not in the public sector, which is already suffering compared to other areas and is likely to have an even tougher time once the Government spending cuts kick in. As for the private sector, it depends whether the Government is right in its prediction that its retrenchment will give private firms more room to grow. Unless they have big public sector clients, of course...

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