Pay freezes look set to spread further into the public sector because of rising unemployment and retail price deflation, according to the CIPD and KPMG.

According to the organisations' Labour Market Outlook, a fifth of public-sector employers have frozen pay awards for the time being, with 6% deferring pay decisions until later in the year.

The report shows employers expect pay increases in 2010 to be lower than in 2009, reflecting labour market weakness and yesterday's announcement that the retail price index has dropped to -1.4%.

Alan Downey, partner and head of public sector at KPMG, said: "Up until now, the private sector has borne the brunt of recession, but financial pressure is starting to build in the public sector. Salaries represent a sizeable proportion of total public expenditure and it is not surprising employers are starting to squeeze that pay bill. While public servants may not welcome this move, the good news is it should reduce the number of job losses that will be required."