Despite increasing pressures, firms are taking a much more practical approach to setting pay conditions for 2011, reveals The British Chambers of Commerce

In a recent survey of 450 businesses revealed that for 2011, 45% of firms will increase pay, 49% will freeze pay, and only 6% plan to reduce wages. 38% of firms surveyed believe that Government cuts will have an impact on their profitability, but only 13% would see this resulting in a reduction of employees.

Of those 309 firms in the survey sample that traditionally pay staff bonuses, 51% have continued to award bonuses, while 49% have not over the past three years (2008-2010). For 2011, of 345 firms in the survey sample, 43% will pay bonuses in 2011.

One business claimed, “At this point in time everyone seems to understand the seriousness of the situation and the need for pay restraint to enhance business efficiencies”. Another firm claimed it would not increase pay so it could keep current staff employed.

Commenting on the results, Dr Adam Marshall, Director of Policy and External Affairs at the BCC, said:

“Firms face a number of pressures moving into 2011. They have to contend with Government spending cuts, increased regulation, and higher taxes thanks to increases in VAT and National Insurance contributions. While these challenges make trading conditions more difficult, British business has proved over the course of the last two years that it will adopt a pragmatic approach to pay settlements in a tough environment.

“Despite a number of businesses suggesting that pay will be frozen, almost as many are suggesting wage rises in 2011. Equally, many businesses say they will deal with reductions in public spending by taking a hit on the bottom line – rather than by reducing staff numbers. This continues a trend we first saw during the recession: firms doing whatever they can to retain staff even when conditions are more challenging.

“The private sector also needs Government to play its part. Making it easier to hire, ensuring faster planning decisions, encouraging business investment and helping exporters are central to making 2011 the Year for Growth that the UK economy needs.”