With continuing uncertainty around global economic conditions and high rates of UK unemployment, a new survey of 100 organisations across Britain paints a picture of lasting pay freezes.
The research by Croner, the largest UK provider of workplace information, software and services, part of Wolters Kluwer, will be a bitter pill to swallow for many employees.
The survey reveals that workers in the private service sector will be the worst affected, with 43% of companies surveyed planning to implement a pay freeze. Private sector employees lucky enough to receive a pay rise can expect to get between 2% to 3%.
It is better news for employees in the manufacturing sector with the majority of organisations surveyed planning to give pay increases of between 2% and 4%.
A quarter of organisations say their pay award for 2012 will be higher than in 2011, rising to 36% in the voluntary sector. However almost half of private service sector firms in the survey say their pay award will be less than last year.
Around one in five organisations who have had a pay freeze in the past are considering compensating staff with a one-off bonus, either this year or when they can afford it.
Around 9% have decided to pay a non-consolidated bonus for one year only instead of the usual consolidated pay award.
Viv Copeland, Head of Reward at Croner, says: “We have found that company affordability is the most important factor when an organisation decides on its 2012 pay award. Individual performance and the ability to attract and retain the right calibre of staff are also very important, which probably explains why 11% of organisations are looking to move away from an annual across-the-board award to individual performance awards.
“Employees will find this news hard to take, particularly with inflation now at 3%1. The majority of employers are well aware that sustained pay freezes will not motivate or retain staff. What many are struggling with is what they can do within their budget to reward and retain hard-working employees, a challenge that is set to stay for the foreseeable future.”
The survey has also found that 6% of companies are planning to make redundancies in 2012 and 18% admitting that they do not know when they will start recruiting again. There is more caution in the private sector compared with the public sector with 14% of the firms surveyed still making redundancies and 11% not planning to recruit until 2013.