Employers fear for staff morale as they hold back on pay

Firms are worried about maintaining the morale of their staff as they continue to hold off from pay rises, according to research today.

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

A survey of 330 firms, employing almost two million workers, also showed that recruitment freezes had fallen, with only the public sector and construction still failing to take on workers.

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

Two out of five 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, said: "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."