Pay Freeze

A survey by the CIPD and KMPG reveals that 1 in 5 employers, both public and private sector, have frozen pay awards for the time being.  Some others have deferred a decision, and most expect pay increases in 2010 to be lower than this year.  These are expected responses to rising unemployment and a low inflation rate. 

While a negative inflation rate means that there is a rise in the real value of incomes, reports of increasing inflationary pressures in the economy will increase the impact of the lack of pay rises, and although it is necessary to keep costs down, the demotivational effect on employees should be considered in making pay decisions.