Pay deals fall to record low levels in manufacturing sector

Manufacturing pay settlements have fallen sharply to a record low level according to research from EEF, the manufacturers’ organisation.

Pay data in manufacturing during the three months to the end of January 2009 shows the average level of pay settlements in manufacturing has fallen to 1.8%, down from the revised figure of 2.7% for the previous quarter to the end of December, the EEF found. The rate of decline in pay rises was unprecedented, it said.

The figure was also the lowest reported for more than 10 years and is an important indicator as it includes a large number of settlements for January 2009, the main month when settlements are reached in manufacturing, according to EEF.

There was also a sharp increase in the number of manufacturing companies freezing pay, with more than 40% of all reported settlements at zero, the research found.

David Yeandle, EEF head of employment policy, said that in freezing pay and reducing awards manufacturers showed that they were adopting a range of approaches to contain costs, while at the same time trying their utmost to retain their skilled workforce.

“The government needs to support these efforts by providing some financial assistance for companies introducing short-time working,” he said.

A survey of 138 payroll managers by the Institute of Payroll Professionals (IPP), in partnership with Pay Magazine, found that 48% would freeze staff wages this year in response to the economic downturn, which has seen unemployment rise to nearly two million. However, less than 1% expected to reduce salaries over the next six months.

Pay experts have been advising companies to lower employee expectations about pay rises during the recession.

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