Staff at Carlisle Council, partners at BDO Stoy Hayward and IT contractors at JP Morgan are the latest employees to be given pay cuts as an alternative to redundancy as the economy descends further into recession. With the British Chambers of Commerce reporting 43% of employers plan to freeze pay this year and a further 9% will make pay cuts, experts say the problem of what HR does with pay is likely to exacerbate.
Lizzy Firmin, HR manager at nautical maintenance organisation Trinity House, says: "More pay will be frozen as profits are hit. Some private-sector companies believe this to be the least expensive or disruptive way of coping with the impact of recession while keeping highly skilled and valuable staff on the books for when things pick up."
According to Charles Cotton, reward and employment conditions adviser at the CIPD, pay will be determined not just by diminishing profits but also by dropping inflation - and pundits are predicting deflation by September.
He says: "In many organisations - especially SMEs - only one or two individuals will see pay rises this year. Perhaps staff will get more money at the completion of a probationary period or employers might offer a higher salary to valuable staff considering leaving."
But Paul Reynolds, HR director at catering firm Elior, is more optimistic. "We have no plans for pay freezes," he explains. "At Elior, in the UK specifically, we have no plans to cut bonuses. If anything, we are introducing new incentive schemes for sales force and senior teams."
HR experts agree bonus schemes and performance-related pay will be affected by the recession and that they should be relevant and proportionate to the achievement of an organisation rather than just a given. "I expect most companies, especially listed plcs, to be far more cautious and transparent about the payment of bonuses," says Reynolds.
But in order to save precious budgets, research from the CIPD shows employers in some sectors could be forced to reduce employees' pay to save them from the dole queue. Cotton says 9% of staff in the construction sector expect a pay cut, followed by 6% in finance and 6% in professional services.
Firmin thinks organisations could devise ways of saving money on staff pay without slashing bonuses or freezing pay. She suggests an increase in flexible working or reducing employees' hours.
Donna Miller (pictured), European HRD at Enterprise Rent-A-Car, says : "Employees used to be able to shop around for the best job but now the pendulum has swung the other way and employers are more in charge and it's a case of 'like it or lump it'. I think there should be an equal balance between employees' and employers' requirements."
This pendulum swing puts staff in a more difficult position when negotiating a pay rise. Firmin says: "I think negotiating higher pay might not be such a high priority for some people as it has been in the past. But employers need to clearly communicate the organisation's individual circumstances to staff so they know where they stand with pay."
In the public sector staff have a clearer understanding of pay than their private sector counterparts because there are fixed pay scales, but 2008 saw more than its fair share of strike action as teachers, police officers and local government staff called for an increase.
"This is a continuing issue," says Jim Savege, corporate director for HR at Cumbria County Council and lead officer for pay and reward at the Public Sector People Managers' Association (PPMA). "In 2008 the unions demanded a pay rise of 6% and we settled at 2.5%," he explains. "This year they want more than 3.5% and we expect continued conversation about the rate of pay in the public sector."
But considering no sector or industry has been left untouched by the recession and as some commentators have already thrown the D-word - depression - into the equation, should employers ignore staff pleas for increased pay on the premise that they are 'lucky' to still have a job?
"The word 'lucky' is flippant," says Savege. "But given the scale of redundancies, being in sustained employment is not a bad thing."
But experts argue the employer not only has to help staff understand why they cannot receive the pay rises they are asking for but also to make them feel valued.
"Employers have to manage staff expectations," says Cotton." How you treat people now will have an effect on how they treat you, and telling staff they are 'lucky' could foster resentment, leading to an exodus when the economy improves."
