Companies look beyond pruning pay

Many companies will be following Corus, the steelmaker, in considering cutting staff pay to avoid job losses, but few are expected to adopt such measures in a fast-deteriorating economy, business organisations say.

It emerged last week that Corus had discussed with unions plans to cut the pay of the Indian-owned group’s 25,000-strong UK workforce by 10 per cent among a range of options to protect jobs during the recession.

However, pay cuts are just one measure in “the toolkit of responses to a dire situation”, according to John Cridland, deputy director-general of the CBI employers’ organisation, with other options including pay freezes, short-time working and hiring freezes.

“There will be lots of redundancies in the current economic environment,” he said. “We have not been flooded with companies coming to us for advice on wage cuts – many more are making the sad decision to go for redundancies.”

The EEF manufacturing organisation also saw little evidence in engineering of pay cut negotiations to save jobs. However, given the difficulties in recruiting skilled staff, it expected members to at least think about means of keeping them on.

“Our members employ highly skilled staff who are expensive to train and hard to replace given the skills shortages in the sector,” it said.

Miles Templeman, director-general of the Institute of Directors, said: “Quite a lot of small to medium-sized companies have taken the view they will go out early with a 10 per cent pay cut – the going rate in the hope they can avoid redundancies.”

But he added that a pay cut could not guarantee there would be no job losses – and other companies were making people redundant.

Stephen Alambritis, of the Federation of Small Businesses, said a recent survey of members had found 21 per cent cutting staff, 23 per cent stopping recruitment and 18 per cent reducing hours. But most small employers worried about the legal implications of reducing pay and feared they would face demands for an above-inflation rise to compensate in the future.

“Union-organised firms can talk to the unions, which can negotiate a pay cut to keep jobs and provide reassurance for the employer that there will be no legal action against them,” he said.

“But small firms often don’t have unions and while they can get advice from the Acas advisory service, there is no institution to guide them through the process step by step.”