The median pay settlement level has fallen sharply to 2 per cent, down from 3 per cent, the latest figures from the IDS Pay Databank, for the three months to the end of April, show.
April is a key bargaining month, and the latest crop of settlements includes a large proportion of freezes, prompted in large part to minimise redundancies.
Ken Mulkearn, Editor of IDS Pay Report, said: ‘Following the “delayering” of the early 1990s recession, few firms have much spare capacity left to cut. As a result, many organisations are seeking to minimise redundancies and hang onto staff in the hope of an economic recovery.
‘In this context, pay freezes, and even temporary pay cuts such as that recently agreed at Honda, are part of a strategy to avoid redundancies wherever possible. In those parts of the economy most affected by recession, the focus is on negotiation to mitigate its effects.
But he added that freezes are occurring only in certain sectors: ‘The contrast with finance shows that pay freezes aren’t the whole picture.’
While freezes are a key part of the picture, most firms are awarding pay increases. Of the 75 new settlements monitored by IDS, one-quarter are pay freezes. However a fifth of the new deals are above 3 per cent, in a range up to 5 per cent. There continue to be some sectoral differences, with freezes common in manufacturing, but less so in areas such as finance. Here, pay freezes have been a rarity so far in 2009, with most finance sector settlements in a range from 2.5 to 3.5 per cent.