Firms concerned about staff morale amid pay freezes

A study by the CBI showed that pay freezes had thawed, falling from a peak of 55 per cent of employers last spring to 14 per cent now, but wage restraint remained the norm.

A survey of 330 firms, employing almost two million workers, also showed that recruitment freezes had fallen, with any remaining ones concentrated in the public sector and construction.

Firms said they were targeting recruitment in areas they believed would boost the growth of their business.

Two out of five firms said they were planning below-inflation pay rises for staff, with just one in 10 saying they will match or better inflation.

Two-thirds of employers described employment relations as co-operative, but many businesses said they were concerned that things could become more difficult next year.

John Cridland, the CBI's deputy director general, said: "During the recession, private sector employees adopted a can-do attitude, accepting that measures such as pay and recruitment freezes were the alternative to companies going under, and further job losses.

"Sustaining that spirit of co-operation will be more challenging now the immediate threat appears to have passed. Firms are cautious about recruitment and pay, given the fragility of the economy, but they know they can't afford to take staff for granted, and must redouble efforts to keep employees on board as they gear up for growth.

"This will be especially true in the public sector which, for the first time, is facing pay and recruitment freezes to reduce the deficit."

Albert Ellis, chief executive of recruitment firm Harvey Nash, which helped with the research, added: "While business confidence in the sustainability of the recovery remains fragile, employers will not be recruiting on a broad scale. However, many organisations are taking a targeted approach to hiring talent to support their growth strategy, and exploit opportunities where market conditions are supportive."