Employer survey reveals pay freezes in majority of companies

A detailed survey of members of the Irish Business and Employers Confederation shows that, while marginally more employers have increased pay for production workers compared with those who have cut wages, a majority of companies have decided to freeze wage rates. Meanwhile, some employers plan to introduce changes to other employment conditions over the next three to six months, while others wish to change the pay structure for new recruits.

A May 2009 [survey (1.6Mb PDF)](http://www.ibec.ie/IBEC/DFB.nsf/vPages/Economics_and_taxation~Resources~business-sentiment-survey-q2-2009-07-07-2009/$file/IBEC Sentiment Survey Q2 09-Employment.pdf) by the Irish Business and Employers Confederation (IBEC) of member companies shows that, while more employers have increased pay for production workers (13%) than have cut it (10%), a growing majority of companies are freezing wages. For ‘other salaried staff’, pay freezes and cuts are even more common than they are for production workers, while management grades have been hit hardest by pay cuts or freezes so far.

IBEC believes that company competitiveness is improving, because at least 67% of production workers have had their pay either frozen or cut, and employers have secured extra flexibilities, higher productivity and non-pay savings.

Main survey findings

The survey was based on a large sample of about 2,500 IBEC members, weighted by sector and company size, with a response rate of 20%. The key findings were as follows:

• 13% of production workers secured pay rises, 10% suffered a real cut in pay, 57% are experiencing a pay freeze and 19% of companies did not state their position in relation to this category;

• 11% of management grades secured a pay rise, 27% have had their pay cut, 59% are experiencing a pay freeze and in 2% of companies the position was ‘not stated’;

• 14% of ‘other salaried staff’ secured a pay increase, 18% had their pay cut, 63% are experiencing a pay freeze and 5% of companies did not state their position.

General pay trends

The general picture, therefore, is that a large majority of companies are freezing pay levels, and not cutting pay as media reports in Ireland have tended to suggest. The application of the national wage agreement under the [Transitional Agreement (2.8Mb PDF)](http://www.taoiseach.gov.ie/attached_files/Pdf files/Taoiseach Report_web.pdf) may be somewhat higher than suggested, given that IBEC’s membership is roughly equally divided between unionised and non-union companies. It may be assumed that a majority of the companies that have applied the national agreement are unionised. This means that the application of the national pay agreement in the unionised sector has been somewhat wider than commentary had assumed.

The number of companies not stating their pay policy for production workers was higher than the other categories, at 19%. The specialist weekly magazine Industrial Relations News (IRN) has commented that it is possible that many of these companies ‘are playing a “wait and see”’ approach, which effectively amounts to a pay freeze by default’.

Looking to the future

Companies were asked what actions they intend taking over the next three months in relation to basic pay. With regard to production workers, only 2% of the respondents stated that they will increase pay; 7% said that they intend to cut pay; 20% did not state what they will do; and a large majority (71%) revealed that they would freeze pay rates. The responses in relation to management grades and other salaried staff were even more emphatic: 80% of employers say they will freeze pay over the next three to six months for management grades and 81% will freeze pay for other salaried staff. Pay cuts for management would be introduced in 13% of companies and 10% of other salaried staff would also face a cut in pay.

The IBEC survey also shows that some employers envisage changes over the next three to six months – that is, June to November 2009 – to other conditions of employment, such as income continuance, life assurance, health insurance, sick pay, paid maternity/adoptive leave, overtime rates, shift premia, educational assistance and mileage payments. Some employers want to change the pay structure for new entrants, others plan to amend the structure of existing schemes and others will seek to reduce individual payments to employees.

New director general at IBEC

Commenting on the survey’s findings, IBEC’s newly appointed Director General, Danny McCoy, stated that:

across all of the companies surveyed, taking into account the large number of pay freezes, pay reductions and a small number of pay increases awarded, the average change to pay rates during the first half of the year was a fall of 4% for management staff; 1.6% for other salaried staff; and 1% for production workers.

Mr McCoy emphasised that, overall, the findings indicate that ‘economy-wide wages will fall on average by about 3% this year’. In addition to adjustments to wage costs, he highlighted that the private sector workforce has also:

demonstrated its flexibility in relation to work practices in order to counter the impacts of the global recession. Many workers have helped reduce unit labour costs by working longer hours and showing greater flexibility in work scheduling.

Brian Sheehan, IRN Publishing