Workers looking at pay freeze for another year despite signs of inflation

Updated: 10:43 EST, 8 February 2010

Workers will face a second year of having their pay frozen even though inflation is starting to increase, a new report predicted today.

The Labour Research Department (LRD) said the rate of wage freezes was accelerating despite RPI inflation increasing by 2.4 per cent in the year to December.

Pay freezes were now a bigger proportion of all wage deals than at any time during the recession, accounting for a third of settlements in recent months, it was found.

Tough: A number of companies are extending a pay freeze into a second year

The research group said a study of deals in its database of over 2,000 agreements found that a number of companies were extending a pay freeze into a second year.

With pay prospects still suppressed, union negotiators remained "extremely cautious" about the state of the economic recovery, said the report.

Union officials warned of a lack of orders, fewer long-term pay deals, pension deficits, a more aggressive approach to issues such as performance from employers and the continuing threat of pay freezes, job losses and cutbacks.

'It is easy to see that pay will not be the sole or even the main bargaining priority in 2010, although it may be too soon to judge the effects of inflation,' said Lewis Emery, LRD's pay and conditions researcher.

'Maintaining jobs and business continuity is a greater concern, both in the private and public sectors, but with inflation at 2.4 per cent pay will not be neglected either.'