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Pay rises remain under pressure

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Firms are beginning to hire again as they recover from the recession, but above-inflation pay rises are still a rarity, a new survey has revealed.

The CBI’s employment trends survey for 2010 found that employers have been able to phase out some of the more drastic measures introduced during the recession and are starting to recruit once more, albeit on a limited basis.

A year ago nearly two-thirds of businesses had a recruitment freeze in place. This fell to 37 per cent six months ago and now stands at just 5 per cent.

Recruitment prospects for the year ahead are mixed if improving, the CBI reported. Just 5 per cent of respondents expected recruitment to be higher across their business as a whole. Instead hiring is likely to be patchy and targeted on filling key posts.

Pay restraint, though, still appears to be a consistent trend across the firms polled, who between them employ some 3 million people.

According to the survey, some 16 per cent of employers are holding to a pay freeze, while just 3 per cent are planning to make an above-inflation pay awards.

In upcoming pay rounds, 29 per cent of employers said they were planning a rise in line with RPI inflation, one in five a general increase below RPI, and a quarter said they intended to target rises on selected staff.

The research discovered that good communication with employees had helped firms cope with the impact of the recession.

Nine out of ten employers (91 per cent) communicated to their staff the effects that the economic downturn was having on business operations. As a result, 87 per cent of businesses believe that their employees understood the need to change working patterns, and more than half (56 per cent) said staff showed a flexible attitude to the changes.

Of the changes made, the most widespread were pay and recruitment freezes (58 per cent and 54 per cent respectively).

More than a third (35 per cent) embraced flexible working, while other changes included cutting back on paid overtime, reducing the use of agency workers, cutting shifts, and short-time working.

So important a role did firms believe good employee engagement played during the recession that they intend to make the practice central to the recovery too.

John Cridland, the CBI’s deputy director-general, said: “Employers have come out the other side of the recession, having managed to keep many more people in jobs than had been expected.

“This has been largely down to the flexibility and goodwill of staff who quickly adapted to emergency measures, including pay and recruitment freezes. Good communication played a key role in helping employees understand the changes needed to safeguard jobs.

“Although there are some signs that job prospects are improving, a good number of businesses are still operating a pay freeze. Those that can afford it are planning modest or targeted pay rises.”