Caterpillar, the world's largest maker of heavy construction and mining equipment, is to cut white-collar pay by as much as 50 per cent.

The company, based in Illinois, said it would slash executive compensation, particularly its incentive and equity-based schemes, the Wall Street Journal reported.

It has also introduced a freeze on recruitment and plans to suspend merit pay increases for managers and support employees.

Caterpillar said executive compensation would be cut by as much as 50 per cent, and it will reduce compensation for senior managers by 5 per cent to 35 per cent in 2009.

Other management and support staff face a reduction of as much as 15 per cent, the Journal reported.

Caterpillar follows a number of other American companies which have begun to institute salary freezes and reductions instead of redundancies, because the cost of hiring and firing can be significant when looking to rebuild a work force after a downturn.

Management pay has been a particular focus of cuts.

Despite a reluctance to impose job cuts, Caterpillar last week announced 800 job losses at its plant in Illinois, the Wall Street Journal said.

It was the first time the company has cut full-time workers on a large scale and for an indefinite period since early this decade.

It has also been shedding workers taken on through employment agencies.

Last week, the company reported a 6 per cent fall in worldwide sales machinery through dealers fr the three months to November, and noted a sharp decline in growth in its Latin American and Asian operations.

It had benefited from a five-year boom, spearheaded by demand for construction equipment in emerging markets.

During that time, revenue more than doubled, and the workforce rose nearly 50 to 101,000.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax