pay freeze

Pay freeze “necessary” for economic recovery, says BoE

Businesses should not offer pay rises despite current high inflation or they could risk damaging the UK’s economic recovery, the Bank of England (BoE) has warned. BoE governor, Mervyn King, said that the current inflation rate of 3.7% (CPI) may increase to 5 % in the coming months, before dropping sharply in 2012. He cautioned employers against raising wages to counteract the effects of high inflation. “The squeeze in living standards is the inevitable price to pay for the financial crisis and subsequent rebalancing of the world and UK economies.” He added that if the Bank of England tried to counteract the rising prices by raising interest rates, it would simply lead to falling wages and therefore the same loss in purchasing power, but at the expense of an even deeper recessio... »

The Big Pay Freeze?

Many companies have frozen pay awards in order to protect jobs in the recession – but is this truly a viable business strategy? Gary White, Business Advisory Partner at Essex-based chartered accountants CBHC LLP examines the issues. At the height of the recession, freezing pay awards was an understandable action – and given the fact that living costs were not increasing, partly thanks to nationwide initiatives including the zero interest rate, the case for this action couldn’t really be disputed. There was a general understanding amongst most staff that such a move was necessary, and some took reduced hours or even worked for no pay at all. More recently, however, talk of economic recovery (combined with a rise in the cost of living) has challenged this general attitude of acceptance. Ther... »