Most companies will freeze pay in 2012, says Ibec

A PAY freeze will remain in place in most companies next year, the employers’ body Ibec has said.

In a report issued today it said that while there were signs of growth in employment levels, employers were still not in a position to award pay increases.

The group suggested that any pay increases awarded would be only in exceptional cases, mainly on foot of productivity increases or greater workplace flexibility.

Ibec said that the findings of its latest pay survey showed that 69 per cent of companies will either freeze or reduce basic pay rates in 2012.

It said that while recent survey data suggested more companies were going to take on new staff over the coming months, pay expectations “needed to reflect current economic realities”.

The employers’ group urged the Government to take a range of steps to restore confidence in the domestic economy to help protect and create jobs.

The survey of over 400 Ibec member companies found that 64 per cent intended to apply a pay freeze for 2012. It also found that about 5 per cent of member companies who responded to the survey expected to reduce basic pay by about 10 per cent.

The survey found that 72 per cent of companies were freezing pay levels for this year, while 7 per cent had cut rates by about 10 per cent.

Ibec director Brendan McGinty said last night that job protection and creation had to be the priority.

“Despite the fact that a quarter of companies plan to hire new staff in the next three months, employers are still not in a position to award pay increases. Companies remain focused on regaining competitiveness and getting pay costs back into line with our trading partners.

“Irish annual nominal compensation costs per employee remain 15 per cent higher than the EU 15 in 2011, despite improvements in recent years. The minority of companies that will award pay rises will do so on an exceptional basis.”

He said it was encouraging that Ireland’s inflation rate – measured as 1.3 per cent according to the EU’s harmonised index of consumer prices – remained the lowest in the euro zone. This ensured that Ireland’s competitiveness relative to trading partners continued to improve.

“Many companies operating in the domestic economy are still struggling to survive. Alongside the current plan for austerity, we need a clear strategy to grow the economy.”

Ibec said the Government should consider measures that it claimed would help restore confidence and boost employment, including reforming pension rules to allow people to draw down a portion of their additional voluntary contributions without penalty at the standard rate of tax.

The lobby group suggested that a social welfare smart card system to ensure that payments and benefits spending are promoted in the domestic economy should be introduced.

It also called for stamp duty and property tax incentives for first-time buyers and said the Government should introduce a communications strategy designed to encourage consumer spending.