Public sector employers could face retention woes when the government introduces a pay freeze for the most senior civil servants, senior NHS managers, GPs, chief executives of quangos and judges next year.

The warning from Duncan Brown, director of reward services at the Institute of Employment Studies, follows chancellor Alistair Darling’s zero pay increase proposal, aimed at reducing government spend.

On the same day shadow chancellor George Osborne said the Conservatives would introduce a public sector pay freeze in 2011 if they come to power at the next election.

Brown said Darling’s proposal came as no surprise, but cautioned that the public sector could suffer as workers jump ship to the private sector.

He told Personnel Today that the public sector had benefitted from the current state of the economy, by enjoying pay rises while much of the private sector had frozen pay.

He said: “The public sector has recruited quite successfully from the private sector.

“Next year we are likely to see pay increases pick up in the private sector, although employment is not supposed to pick up until later next year, hiring is predicted to start.

“There’s a real issue about competitiveness of pay, if the private sector picks up quicker and public pay is frozen – particularly in specialist jobs where there’s a gap.”

Brown advised HR departments to look at their total rewards offer to ensure employees understand and appreciate their reward package, and urged them to issue total rewards statements, which are not as common in the private sector as the public sector.

“There should be good communication of reward, face-to-face with the line manager. And emphasise the non-financial benefits; the public sector is good on flexible working.”

Gill Hibberd, president of the Public Sector People Managers Association warned that the Conservative pay freeze announcement could put pressure on pay rounds for 2010.

“If people are assuming that there will be a change in government, this could put tremendous pressure on pay negotiations for 2010 because they [unions] are anticipating a pay freeze.

“It’s now we need to have the pay constraint because of the economy. Who knows what it will be like 2011. A pay freeze in today’s environment is a sensible way of protecting jobs in the longer term.”