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The year ahead: Moderate pay rises predicted for 2010 but workers will still be worse off

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Employers predict pay rises for UK workers will average 1.6% next year - 2% in the private sector and only 1% in the public sector.

And, according to the Hay Group, which carried out the research, ‘moderate' pay rises will leave workers worse off in 2010, as inflationary pressures boost the cost of living.
 
The research reveals two thirds (6%) of employees are working over and above contracted hours, while more than a third (36%) have put in increased overtime over the past 12 months.

Pay rises in the private sector will be driven by improving company performance as the economy begins to pick up, the Hay Group predicts. Corporate performance in many sectors is beginning to improve, although there may be significant differentials between industries.

As a result, freezing pay for a second year running will be a ‘very hard sell'. As such, pay increases in the private sector may stretch to more like 3% - but will still lag behind inflation.  

But the pressure to keep a lid on pay increases in 2010 will be stronger in the public than private sector - a reversal of fortunes compared with 2009.
 
The public sector is already bracing itself for major cuts, and even though no major budget decisions will be made until after the election, pay restraint will be a target. According to Hay Group predictions, there will be pay freezes for many, but contractual obligations to award increments will make a complete freeze impossible.
 
Overall in 2009, workers are clocking up an average of six hours per week unpaid overtime but over a quarter (28%) still experienced a pay freeze during 2009.
  
As a result nearly half (45%) are less proud to work for their organisation than they were a year ago, while a similar number would not recommend their place of work to a friend or family member.

 

Close to a third (30%) rate their organisation as a ‘worse place to work' compared with 12 months ago.

Stuart Hyland, reward expert at the Hay Group, said: "It has been a really difficult year for workers in the UK.
 
"Job uncertainty and long hours have taken their toll, and employees are looking for something back from their employers in return for their efforts.
 
"Diminishing pay in relative terms, will not be particularly energising news for employees and will be a hard sell for employers."

The pay outlook risks exacerbating a looming talent exodus from organisations that fail to re-energise their employees as the economy recovers.
 
Hay Group found that a third (33%) of employees are actively looking for a new job, with nearly half (47%) planning to leave within the next two years.
 
Hyland added: "Employers urgently need to take action to re-engage their workforce, or they risk losing the very people who would lift their organisation out of recession.
 
"Those who succeed will capitalise on the coming talent merry-go-round. Those who fail will be giving competitive advantage away."