In an attempt to control business costs during the recession period, 10% of firms in the UK plan to freeze the pay of their employees.

According to the Incomes Data Service (IDS), firms are also putting off decisions about wages, which it says: ‘may be covering a much darker picture’ when it comes to the final extent of the pay freezes. But it also says that the average rate will increase, just more slowly.

There will be some sectors of business however, that see no change in the inflation of pay. Utility firms and the defence industry are two such examples.

Another thing that is becoming increasingly common within the workplace, is employers reducing the amount of hours their staff work in order to cut costs and still being able to keep many skilled and experienced employees within their firm.

Some employers have even waived bonuses and pay hikes, and told employees that there is no prospect of a pay rise this year.

‘Fairness Agenda’

Editor of the IDS Pay Report, Ken Mulkearn said: “We are also seeing pay pauses, where it comes to the time for an annual pay review and firms are saying they will put off a decision on what to do about pay.

“This means it does not get recorded as a pay freeze even if, in all likelihood that will be the outcome eventually in many cases.”

Though according to Mr Mulkearn, some businesses have decided to operate a ‘fairness agenda’ whereby staff at the higher end of the payment scale’s wages will be frozen, but lower salaries will be increased.

The car manufacturing business has been particularly badly hit in the recession. Some employees are being cut to just a couple of shifts each week and have had overtime banned, which has a serious impact on the amount of money each employee brings home.

‘What Else Can Businesses Do’?

Head of Economics at the TUC, Adam Lent has said that pay freezes are becoming “increasingly widespread… It’s a very tough recession. People are having their pay frozen or even cut and it can affect their finances extremely badly.

“Unions will always opt for a pay freeze and short-time working over redundancies. People understand that it’s better for a large number of people to take that pain, which is quite tough, than to have a small number of people take redundancy which is totally devastating.”

John Cridland of CBI business group said around half of its members would not be looking at pay rises this year. He said: “What else can businesses do? They only have a certain amount of money coming in and a certain amount going out and these have to balance otherwise the business closes down.

“The objective of a business is not to lay people off. If they have to reduce overtime, if they have to cut out bonuses or change shift patterns they will do so.”

What Do You Think?

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