Almost 75% of companies planning to freeze or cut pay, says Ibec survey

ALMOST THREE-QUARTERS of companies plan to either freeze or cut pay this year, according to research by the employers’ body Ibec.

The group published its latest pay survey yesterday, which was carried out in November and examines emerging trends on pay costs.

It found that 76 per cent of respondent companies had implemented a pay-freeze in 2011, and 74 per cent would “either freeze or reduce basic pay rates in 2012”.

Some 69 per cent intended freezing pay and 5 per cent cutting pay, by a median of 9 per cent.

More than 400 members of Ibec companies are interviewed for each of its quarterly surveys.

While recent survey data had suggested some companies would hire over coming months, Ibec said pay expectations needed to “reflect current economic realities”.

“Pay rises in 2012 are unrealistic,” it said.

Two out of five respondent companies expected no change to their total pay bill this year.

An average increase of 0.83 per cent to total pay bill is expected across all surveyed companies.

Almost one-quarter (23 per cent) intend to increase pay rates by a median of 2 per cent. Of these, 58 per cent said they expected increased productivity this year, 72 per cent increased processes, 48 per cent increased workforce flexibility and 65 per cent expected new product or service development.

However, said Ibec, measures in budget 2012, including reduction in the redundancy rebate and the abolition of employers’ PRSI relief on pensions, had increased labour costs and damaged competitiveness.

Ibec director Brendan McGinty said the Government must take “practical steps to restore confidence in the domestic economy”.

Job protection and creation remained the priority for most businesses.

“This means pay restraint nationally and an unwavering focus by Government on restoring competitiveness.

“ Companies are focused on getting costs back in line with our trading partners. This is vital if we are to restore our economic fortunes.

Many companies operating in the domestic economy are still struggling to survive. Alongside the current plan for austerity, we need a clear strategy to grow the economy and to sustain jobs. Ireland has lost 300,000 jobs over the last four years and we have a shockingly high unemployment rate. This is where our efforts must focus.”

He said recent EU data showed Ireland was the only country to register a drop in hourly labour costs of 1.1 per cent last year and the inflation rate at 1.7 per cent was the second lowest in the euro zone.

“But much more needs to be done. Wage levels remain about 15 per cent higher than the EU 15 in 2011.

“Inflation is set to increase next year following budget 2012 decisions to reduce the redundancy rebate and abolish employers PRSI relief on pensions.

“These decisions will increase labour costs and undermine our efforts to regain competitiveness,” Mr McGinty said.