Personnel Today
  • Home
    • All PT content
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • Brightmine
    • Learn more
    • Products
    • Free trial
    • Request a quote
  • Webinars
  • Advertise
  • OHW+

Personnel Today

Register
Log in
Personnel Today
  • Home
    • All PT content
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • Brightmine
    • Learn more
    • Products
    • Free trial
    • Request a quote
  • Webinars
  • Advertise
  • OHW+

Pay & benefitsOpinion

Public sector pay freezes

by Personnel Today 14 Oct 2009
by Personnel Today 14 Oct 2009

At the start of this month, the largest political parties were seemingly trying to outdo each other in the ‘macho-ness’ of their proposals on public sector pay.

Chancellor Alastair Darling announced he has written to the salary review bodies calling on them to freeze the pay of senior NHS managers, GPs and judges, while holding the rises of 700,000 middle-level public servants to less than 1%.

Shadow chancellor George Osborne responded similarly, promising to freeze the pay of four million public sector workers earning more than £18,000-a-year if the Tories are elected next year, and saving an estimated £3.2bn over the following 12 months.

As taxpayers aware of the scale of the deficit in the UK’s decidedly rocky public finances (equivalent to 14% of GDP and well above many of our international competitors), we might all understand, even applaud, such united and zealous cost-cutting by our politicians.

Even civil servants themselves might have anticipated a freeze. Haven’t there been a lot of pay freezes and cuts in the private sector this year, which have helped to control costs and supported the likely recovery of the UK economy into growth by the end of the year? This rationale seems to explain the surprising lack of staff and union opposition. But dig a little deeper, and the parallels and the justification seem much less obvious.

According to IRS, 40% of private sector reviews in the second and third quarters resulted in pay freezes. But for more than a million employees (including me), this was simply because we are on RPI-linked formulas, and throughout this year retail price inflation has been negative. So despite the freeze, we have still been enjoying real earnings growth.

Even where pay awards have been genuinely frozen, as Massimo Macarti, the European HR chief at Canon, told an Institute for Employment Studies audience recently, “pay and recruitment freezes need to be taken with a pinch of salt”.

In many cases, performance-related awards are still being made to high performers, promotions being put through, even additional benefits such as holidays being given to hang onto valuable staff and avoid the demotivation of the majority by the absence of any pay increase.

Fast-forward to next year and we have a very different situation. Even a weak economic recovery is expected to result in a rapid rise in price inflation, and average earnings increases look likely to be back up to 3% mid-2010. Fewer than 10% of private sector employers expect their pay freeze to continue.

So civil servants will in all likelihood suffer a real cut in their earnings next year.

And as private sector awards pick up to 2% or more, the risk of a drain of talent from public to private sectors may re-emerge, despite continuing high unemployment. This is particularly so if the freeze is absolute, without the sort of ‘intelligent’ management of pay costs that Macarti mentioned.

Recent years have seen a significant switch of talent from private to public sector, and the quality of public services has undoubtedly benefitted. The reversal of the trend could, as the Royal College of Midwives points out, damage recruitment and retention: “we have too few midwives, a pay freeze may well cause existing midwives to leave”.

And just how strong is the cost justification? Without further efficiency gains and almost certainly public sector job cuts, Darling’s £300m and Osborne’s £3bn payroll savings per annum will barely dent the forecast £100bn government spending deficit.

Pay freezes have worked in the private sector because of a highly unusual situation of negative inflation. Leaders have convinced employees to trust that the savings are being made for the common good. In those rare situations where there has been industrial action or the threat of it, employees have not been convinced.

Sign up to our weekly round-up of HR news and guidance

Receive the Personnel Today Direct e-newsletter every Wednesday

OptOut
This field is for validation purposes and should be left unchanged.

But how convincing are a group of party leaders who appear to be playing political football with the living standards of millions of public sector workers?


Duncan Brown, director, reward services, Institute for Employment Studies

Personnel Today

Personnel Today articles are written by an expert team of award-winning journalists who have been covering HR and L&D for many years. Some of our content is attributed to "Personnel Today" for a number of reasons, including: when numerous authors are associated with writing or editing a piece; or when the author is unknown (particularly for older articles).

previous post
UK unemployment hits 2.47 million
next post
New online tool cuts HR event administration by 80%

You may also like

Next to improve wage-setting transparency after shareholder pressure

16 May 2025

Culture, ‘micro-incivilities’ and invisible talent

14 May 2025

Rethinking talent: Who was never considered in the...

7 May 2025

Eight ways to best support grieving employees

6 May 2025

Ofgem workers ballot for strike action

2 May 2025

What will reward look like in 2035?

28 Apr 2025

Leading with honest feedback: A responsibility in recruitment

24 Apr 2025

NI increase has not caused ‘knee-jerk reaction’ in...

23 Apr 2025

Exploring the best London office locations for ‘Zillennials’

16 Apr 2025

Post-pandemic starters seek more pay for on-site working

10 Apr 2025

  • 2025 Employee Communications Report PROMOTED | HR and leadership...Read more
  • The Majority of Employees Have Their Eyes on Their Next Move PROMOTED | A staggering 65%...Read more
  • Prioritising performance management: Strategies for success (webinar) WEBINAR | In today’s fast-paced...Read more
  • Self-Leadership: The Key to Successful Organisations PROMOTED | Eletive is helping businesses...Read more
  • Retaining Female Talent: Four Ways to Reduce Workplace Drop Out PROMOTED | International Women’s Day...Read more

Personnel Today Jobs
 

Search Jobs

PERSONNEL TODAY

About us
Contact us
Browse all HR topics
Email newsletters
Content feeds
Cookies policy
Privacy policy
Terms and conditions

JOBS

Personnel Today Jobs
Post a job
Why advertise with us?

EVENTS & PRODUCTS

The Personnel Today Awards
The RAD Awards
Employee Benefits
Forum for Expatriate Management
OHW+
Whatmedia

ADVERTISING & PR

Advertising opportunities
Features list 2025

  • Facebook
  • Twitter
  • Instagram
  • Linkedin


© 2011 - 2025 DVV Media International Ltd

Personnel Today
  • Home
    • All PT content
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • Brightmine
    • Learn more
    • Products
    • Free trial
    • Request a quote
  • Webinars
  • Advertise
  • OHW+