Firms hiring staff again, but pay restraint still the norm

FIRMS are starting to hire staff again as they recover from the recession, but pay restraint is still the norm across industry.

A survey of 666 companies by the CBI and recruiters Harvey Nash found that 16 per cent are still freezing pay, with just three per cent planning to give staff an above-inflation wage rise.

Most of those questioned said the UK's flexible labour market helped stem job losses, although many froze recruitment and pay to help cope with the economic downturn.

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The research showed that a majority of firms believed staff understood the need to change working patterns to deal with the recession and showed a flexible attitude.

Just one in 20 firms had a freeze on recruitment, compared with more than a third six months ago.

Andrew Palmer, CBI regional director for Yorkshire and the Humber, said: "Employers have come out the other side of the recession, having managed to keep many more people in jobs than had been expected. This has been largely down to the flexibility and goodwill of staff who quickly adapted to emergency measures, including pay and recruitment freezes.

"Although there are some signs that job prospects are improving, a good number of businesses are still operating a pay freeze. Those that can afford it are planning modest or targeted pay rises. By contrast, earnings growth in the public sector is outstripping the private sector.

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He added that so far the public sector has been cushioned from the impact of the recession, but it now faces a squeeze.

Nine out of ten companies said they have made changes to working patterns in response to the recession. The most widespread measures were pay and recruitment freezes, which were introduced by 58 per cent and 54 per cent of firms respectively.

More than a third (35 per cent) have embraced flexible working, including tele-working.

Other changes to working patterns included: cutting back on paid overtime (32 per cent); reducing the use of agency workers (28 per cent); cutting shifts (13 per cent) and short-time working (12 per cent).

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Albert Ellis, chief executive of Harvey Nash, said: "We are seeing the first indications in the market that businesses are gearing up for a return to growth and this trend is most concentrated in the technology, financial services sectors and some areas of manufacturing. There is a sense that the UK economy as a whole has turned a corner.

"The UK has one of Europe's most flexible labour markets and without doubt this will play a major part in the recovery."