Partner Article

Businesses take cautious approach to pay increases

Businesses are taking an increasingly cautious approach to pay despite evidence of a recovery in the public sector.

The CBI and Harvey Nash Employment Trends Survey indicated that most businesses are showing restraint, with nearly half planning a below-inflation pay award or targeted pay rises, with a fifth planning to implement a pay freeze.

Commenting on the results, CBI director-general John Cridland said: “Businesses have been creating jobs where they can over the past few months, and it looks as though that steady trend of employment growth in the private sector is set to continue.

“But hiring plans are cautious, and pay awards in particular remain low as businesses look to make sure they stay competitive in tumultuous times.

“We have to accept this constraint as the new normal – we will only be able to afford to pay ourselves more in the long-term by improving productivity and competing more effectively around the world.”

He is now calling on the Government and business to deliver targeted action to help young people who are unemployed as a way of increasing employer appetite to hire them.

Half of all employers expect to have opportunities available for unemployed young people, although 49% have identified a lack of skills and 37% as a lack of aptitude as real barriers which need to be overcome.

“Encouragingly, around half of firms say that the Youth Contract would persuade them to take a chance on hiring a young person, although one-in-five remains unsure.” He added.

The overall recruitment picture looks positive, with 30% predicting that workforces will be larger in a year, 18% think they will be smaller giving a balance of 12%.

Albert Ellis, Chief Executive of Harvey Nash, said: “Hiring in today’s new normal is clearly focused on growth opportunities.

“While the overall approach is prudent, some sectors are clearly more buoyant, with science, engineering and hi-tech leading the way.

Two thirds of businesses perceive employment regulation to be the biggest threat to labour market competitiveness, and nearly half were affected by the Agency Workers Directive when it was introduced in October 2011. Of these firms, nearly 60% have reduced their use of agency workers, instead preferring to employ temporary workers on fixed-term contracts.

Katja Hall, CBI Chief Policy Director, said:“Employment law is now seen as a brake on competitiveness by two-thirds of firms, and 52% expect new rules from Brussels to prove damaging in the next five years.

“While some degree of flexibility has been maintained through other methods, the survey shows that the overall effect of these unwanted and unnecessary regulations is to reduce opportunities for people to find employment.

“Alleviating these damaging effects should be an issue of the highest priority for the Government, starting with working in Brussels to get rid of the directive entirely.

“Employment regulations themselves can be a barrier for firms, particularly smaller ones, but the number one issue for businesses is how the rules are applied in tribunals.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .