Half of respondents plan below-inflation pay awards

Nearly half (48%) of respondents said they are planning a below-inflation pay award or targeted pay rises, according to research by the Confederation of British Industry (CBI) and Harvey Nash.

The employment trends survey, Facing the Future, which polled 319 organisations employing 1.9 million people in the UK, also found that 20% are respondents said they are planning a pay freeze in order to remain competitive.

Six months after the implementation of the Agency Workers Regulations, 46% of respondents have been affected by the new rules. The legislation, which came in 1 October 2011, means that, after 12 weeks of employment, temporary agency workers will have the same basic pay, holidays and benefits as if they had been recruited directly by the organisation.

More than half (57%) have been forced to cut down on their use of agency workers, while 8% have stopped using them altogether. The regulations are having a detrimental impact on work opportunities, with 12% of firms reducing headcount, and 17% preferring to increase overtime for existing staff rather than use agency temps.

Other adaptations to respondents’ resourcing plans include over a third using more fixed-term contracts (36%), and others using other temping arrangements, such as the Swedish Derogation model of paying between assignments in return for no equal treatment rules on pay or managed service contracts (27%).

The research also found:

  • 85% of respondents said their employees recognise the need to contain costs and adapt patterns of work in response to market pressures.
  • Top priorities for employers over the next 12 months include: securing high levels of employee engagement (60%) and containing labour costs (48%).

Katja Hall, chief policy director at the CBI, said: “There’s a growing realisation among employers and employees that to stay competitive in tumultuous times, organisations are increasingly having to take a cautious approach to pay.

“Given that workplace relations remain positive and morale high, it seems people are accepting that pay constraint is now the norm, and we will only be able to pay ourselves more in the long term by improving productivity and competing more effectively around the world.”

Albert Ellis, chief executive officer at Harvey Nash, added: “People are the greatest asset of any organisation, and employers recognise the value of good communication with their staff.

“So, despite the tough trading conditions and economic uncertainty we’re all facing, it’s not surprising that employee engagement has emerged once again as a top people priority for the year ahead.

“The fact that two-fifths of companies say that morale among staff is high or very high paints a picture of a positive, can-do atmosphere in the private sector, where businesses and employees are working together to weather economic storm clouds.”

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