Robert Watts
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Millions of people who work in the private sector face having their pay frozen or cut next year, employers have warned.
David Frost, director-general of the British Chambers of Commerce (BCC), said: “First of all employers talked of pay freezes, but in the last two weeks directors have started talking to me about reducing pay next year.
“This is the third recession I’ve seen, and I’ve never seen employers cutting wages before. This shows how bad things have got – nothing is now off limits. If this keeps more people in work it’s surely the better of two evils.”
The BCC polled a sample of 300 member firms and found that 43% planned to freeze wages and salaries in 2009. A further 9% will cut pay – a measure almost unprecedented in the experience of today’s workers.
In the City, Deutsche Bank, Barclays Capital and Royal Bank of Scotland have all cut the pay of IT workers. JP Morgan is cutting the amount it pays IT contractors by 15%.
BDO Stoy Hayward, one of the UK’s biggest accountancy firms, is to pay its partners 30% less next year. Fund managers at Schroders and Fidelity have also had their pay cut for next year.
Pay freezes have become increasingly common among manufacturers. According to the Engineering Employers Federation, a quarter of firms will keep pay levels the same in 2009. The newspaper groups Trinity Mirror and Johnston Press have already introduced pay freezes for next year.
Miles Templeman, director-general of the Institute of Directors, said: “We are now seeing wages being cut in a variety of sectors: manufacturing, engineering, catering, but also white-collar professions such as law and accountancy. Usually employers talk of reducing pay by 10%.”
Firms looking to cut pay must win agreement from staff, a trade union or staff association. More than 2,500 staff at JCB, the manufacturer of construction vehicles, agreed in October to be paid about £50 a week less to keep their jobs. The move reduced the number of proposed redundancies from 500 to 178.
However, trade unions have intervened to block proposals by two big employers to cut pay. Corus, previously British Steel, had intended to slash the wages of 25,000 staff by 10%. A similar plan at Vauxhall, the car manufacturer, was also rejected by union officials.
As hundreds of thousands of businesses in the private sector face up to the recession, the BCC and the Institute of Directors are calling for the public sector to share the pain.
Most civil servants and other state workers are in line for a pay rise of 2% in 2009.
Frost said: “I look at the continuing pay rises and creation of jobs in the public sector and it’s a different world from the one the rest of us live in. It’s as if they don’t understand how bad this recession is.”
The BCC is also calling for the national minimum wage to be frozen this year to help small businesses. It stands at £5.73 an hour for workers aged over 22 but is set to rise by an as yet undecided amount in October.
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Trade unions appear to be making decisions to refuse pay cuts without consultation with the workforce. Surely a ballot is needed to establish the majority view. Although not ideal I would guess many would agree that 90% pay is better than 0%? This should be applied to all levels of the organisation.
Karen, Newport, Wales
In times like these when pay is being frozen and / or cut it is essential to have reward systems in place that motivate staff.
START (Salary Target and Reward Technique), designed 30 years ago for the aluminium industry helped to turn losses into profits, incentivised the staff, and operated, virtually unchanged, for the next eighteen years.
Robert Kenwrick, Wokingham, United Kingdom
The pay of public servants is essentially determined with reference to similar private-sector work, and comes from taxes. From both perspectives a pay review is justified.
Paul, Lincoln, UK
I am fed up of people putting down public sector workers. Public sector staff work incredibly hard for very little reward. For years and years public sector have been asked to do more with less resources. I think you will find its the private sector that have caused this recession!
Steve Hill, Chafford Hundred, Essex, England
Andy - "...The public sector have lower pay rises in the growth periods ..." I don't think so. In my last 6 years as a Software Engineer in a US company I had an average 0.9% pay rise (0% in 3 of them). Not allowed union recognition( thanks Maggie) I left - as did many others. Better off on benefits
Clive, Gloucester, UK
The workers in this country have had their rights eroded for the last 20 odd years under Conservative and Labour governments. Trade unions are ineffectual. We get less than inflation rises in good times, and pay cuts in bad times with tax hikes coming if or when things improve.
Stop moaning. Fight!
David Postle, London, England
" but i still work damn hard for what I earn"
Daisy, MK UK
And obviously private sector workers don't... welcome to the real world.
Howard, Manchester,
The public sector has grown by over 500,000 jobs since Labour came to office. This is "empire building" on a grand scale with no objective other than micromanaging the rest of us who are actually productive and earn foreign currency for this country. The situation is totally unsustainable.
Dwight Vandryver, Scholar Green, UK
I work in the public sector, have no final salary pension, just one I am paying into myself with a contribution from the LA. I'm not sure who gets a final salary pension now but it isnt me! I would take a pay freeze this year to shoulder the burden, but i still work damn hard for what I earn
Daisy, MK UK,
As i work for the private sector myself i find it pretty disgusting that once again we are in the firing line by BIG FAT CAT'S who earn more money than me and like others, are asking for the minimum wage to be frozen. Perhaps they themselves would like to take a pay cut small hands deep pockets
Sarah Quinton, Wolverhampton, England
As a retired teacher on a final salary pension with a rather nice lump sum may I give my thanks to those in the private sector who have made a contribution to it. Along with my own and 35 years at the chalk face !
derek, Stockport, England
The public sector workers in general are amongst the lowest paid workers so a 2% pay increase on not a lot works out at not a lot, so the city workers and private buisness workers who have had huge bonuses and back handers - times up welcome to our real world which has never been a pretty place!
bek, BATH, UK
Private vs public sector debate aside I can think of no better way to ensure a deep and lasting recession than for private firms to cut wages, reducing peoples spending power even further at a time when most people are struggling to begin with.
Ed, London, Uk
Most of the comments about public pay are way out of line, there are many public servants who we rely on, doctors, nurses, firemen, police etc etc, what they should be saying is get rid of the jobsworths who do not actually contribute to anyone's well being.......
JN, Tripoli, Libya
Will those leftists who demand that welfare payments 'keep up with wages' now aquiesce in their fall? No, I thought not. In all seriousness thousands may have to give their jobs up to maintain their incomes!
Eric Skelton, Cardiff, Wales
Time also to curb the freebies politicions get that we tax-payers have to pay for. Freeze Browns pension also, as he has ravaged everyone elses in the private sector.
Mabs, Northampton, UK
Whilst it may be rather unfortunate to have to suffer a pay cut, there are probably three million people out there who would love to have a job,even at a reduced rate,
This Government's policies have created more unemployment than any other, I would love to have a job, my savings now all gone.
Clive, Lancing, England
once again its a case of the public sector play while the rest pay
ricey, halifax, england
Unionised public sector and Labour have a lot to answer for, it is about time they started to deliver VALUE FOR MONEY and started charging for services such as translation services.
steve tea, manchester, cheshire
"the government has the right values and the right policies" says Gordon Brown; and it is growing increasingly right wing, says I.we are not fooled by the constant repetition of the word "right"
peter c, Devizes, Wessex
As a public sector worker I agree that we should share the pain. What also concerns me is the apparant loathing that some of your replies have for public sector workers. I wonder if they were as vitriloic of the billions of billons of pounds of pubilc money used to bail out the greedy bankers!
Kieran O'Sullivan, London,
Steve Merchant sums up the views of many when he says: "Time for the public sector spongers and freeloaders to question their patriotism".
Those public sector workers in the Police, Armed Forces, Immigration Service, Prison Service, SOCA, MI5 and MI6, might disagree.
Rick Worth, Rochester, UK
Civil Serpents er, Servants never restrain their lavish pay, benefits and final salary retirement packages. Yet it is the people in the private sector who create the REAL wealth in the economy.
Socialist governments steal from the private sector and individuals in order to pay the public sector.
steve, Abergele, UK
I agree with most of you, the public sector pay rises are fuelled by the boom in the private sector (tax revenues etc). Unfortunately the public sector is going to have to join the rest of us as far as belt-tightening, most especially LOCAL AUTHORITIES. Thats where the most waste can be found.
ANDREW , HACKNEY, LONDON
Public sector and government simply do not realise that they are only sustainable by the wealth creation of the private sector. The public sector does not create wealth for the economy, it is an overhead. Overheads should be reduced at times when growth is reduced.
Ian, Bristol, UK
Public sector and government simply do not realise that they are only sustainable by the wealth creation of the private sector. The public sector does not create wealth for the economy, it is an overhead. Overheads should be reduced at times when growth is reduced.
Ian, Bristol, UK
Public sector and government simply do not realise that they are only sustainable by the wealth creation of the private sector. The public sector does not create wealth for the economy, it is an overhead. Overheads should be reduced at times when growth is reduced.
Ian, Bristol, UK
I work in the public sector and, although having had no access to the obscene salaries paid to some in the private sector, have no problem with accepting that the pain should be equally shared. As a first step, what about abolishing the inequitous annual bonus scheme in the Civil Service.
Galahad, Yeovil, UK
The public sector is going to get heavily culled after the election, but for now there should be a pay freeze, especially in Local Government.
Mike Livingstone, Reigate, UK
Time for the public sector spongers and freeloaders to question their patriotism.
Steve Merchant, Shrewsbury, UK
The public sector can continue their reckless spending from the boom years into the bust years, simply by playing the 'Keynes' card.
Unfortunately this option is not available to the private sector.
Sam, London,
Board members will still get pay rises, bonuses etc (or at least huge ones when the crisis is over).
David Frost says he's never seen workers taking pay cuts before? Really? Back to school for him!
More hypocrisy is companies will still increase and pay share dividends - including to Directors.
Paul C, Harlow, England (not EU)
Freezing or cutting pay? That means the cost of food,fuel and other utilities will decrease in line with the cuts. Doesn't it?
Paul Beaumont, London, UK
Public sector and government simply do not realise that they are only sustainable by the wealth creation of the private sector. The public sector does not create wealth for the economy, it is an overhead. Overheads should be reduced at times when growth is reduced.
Ian, Bristol, UK
Who had pay rises BELOW inflation & the recommendation of a review body. Who had a government review promising better pay & conditions which demanded more hours on the same pay (pay cut)? Many people come to the public sector from the private and it is not for the money! Shame on you (except Andy!)
Matt, Reading,
Lets remember that public sector workers teach your children, care for you when you are ill and clean your streets. Many of us who work in the public sector still do it out of a sense of public service, how sad that so many of you seem to think we are leechers in 'non-jobs'.
Martin, Doncaster,
Will the Top Salary Review Board and all other boards that set public sector pay with reference to the private sector undertake revisions downwards - and will these apply to final salary pension rights?
If not - why not?
Arthur, London,
Andy's wrong. During the boom years public-sector pay outpaced private, as Brown taxed, borrowed and spent. With no discernable effect in either quality or quantity of output. Boom or bust the public sector lives like a leech on the private.
Eddie Reader, birmingham, england
What's the chances of the gravy train public workers taking a pay freeze or saying adios to final salary pensions? Zippidy.
Robert Mackay, Glasgow, Scotland
Agree with Alan. I left uni 6 months ago and I've got a job in the public sector. The pay is good and job security almost 100%. Then there is the final salary pension which is worth a mint. I thought I would work in the private sector as a solicitor but instead am about to join a local authority
George, Leeds, uk
I can't help but pick up the irony in Alan's comment "If your incompetent..." Maybe that's private sector grammar!! The public sector have lower pay rises in the growth periods so should not have to cut back in the recession like others.
Andy Smith, Croydon, UK
Haven't the left wing arrogant union leaders got an ounce of business acumen.These co's will just close up shop & go overseas.That's what happened to other English Industries.Cheaper labor costs etc.Message to union leaders we are no longer living in the dark ages.Lessons have not been learned.
ann, london,
Clearly government workers don't remember what happened in Russia when the wage bill exceeded taxes coming in ... no pay for months. Not sure where our own government are going to raise money when credit runs out ... who in their right mind would lend to Brown and his incompetent crowd!
Tom, Lichfield,
The public sector is definitely the way to go in Britian. Rises when the economy is in downturn, early retirement age, final salary pension and if your incompetent you get a generous early retirement package. The only thing you have to sacrifice is self-respect.
Alan Craigie, Aberdeen,