UK follows US with pay freezes and clawbacks

UK executives face frozen salaries and further pay clawbacks, following trends in the US, experts claim.

A survey by business consulting firm Watson Wyatt found the number of US companies that have frozen salaries and added clawback policies to their executive pay programmes has more than doubled in the past three months.

Respondents who had seen their salaries frozen rose from 21% in December to 55% last month. Half planned to decrease the 2009 bonus pool by about 40%, and a quarter admitted to having added a clawback policy.

Sue Bartlett, senior reward consultant at Watson Wyatt, said it was likely pay trends in the US would be copied in the UK.

“So far the recession has caused US companies to re-evaluate the long-term implications of their executive pay policies, and it is still not clear whether the changes they have made have been aggressive enough to placate shareholders. These are exactly the same issues facing UK boards,” Bartlett said.

“It is not unreasonable to expect to see further salary freezes and clawbacks in the UK also,” she added.

Research found one in six pay settlements in January were pay freezes.

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