Freezing public sector pay would provide a golden opportunity to cut costs, but could lead to long-term recruitment, engagement and retention problems, experts have said.
As RPI inflation – the index used to negotiate pay rises – dropped to 0.1% in January from 0.9% in December, employment bodies including the Chartered Institute of Personnel and Development (CIPD) warned there was increased pressure on employers to limit pay rises.
John Philpott, the CIPD’s economic adviser, said that near-zero inflation presented a chance for public sector employers to freeze pay altogether.
“At a time of considerable strain on the public finances, the government should take advantage [and] freeze public sector pay,” he said.
He suggested the money saved could be pumped back into funding training and other measures geared at getting the unemployed back to work.
However, Stephen Moir, president of the Public Sector People Managers’ Association, warned that pay freezes in the public sector pay were not the answer. He told Personnel Today: “The public sector is often the largest single employer in a given area and if our employees feel undervalued and singled out, then it will lead to problems with recruitment, engagement and retention and ultimately may affect the services we deliver.
“During the recession, demands for public services will simply increase, because more people will be in need of support. Freezing pay will simply create immediate problems and potential long-term pressures.”
Unions warned it would be unfair to freeze public sector pay while allowing the private sector settlements to go ahead. TUC general secretary Brendan Barber said: “We expect to see a wide range of settlements this year in the private sector just as we have in previous years, and it is unfair to hold public sector staff behind their private sector colleagues yet again.”