Pay Rises Unrealistic for 2012 Says IBEC

According to IBEC’s latest pay survey (Q4, 2011), it is unrealistic to expect pay rises in 2012. The survey has found that 74% of companies will either freeze or reduce basic pay rates this year. IBEC believe that while recent survey data suggested some companies will hire over the coming months, pay expectations need to reflect current economic realities.

IBEC has claimed that the recent 2012 Budget has had a damaging effect on employers, largely due to decisions made to dramatically reduce the redundancy rebate as well as the abolishment of employers PRSI relief on pensions. IBEC argues that these two decisions will add to inflation this year, increasing labour costs and affecting competitiveness in the Irish market.

The IBEC pay survey of over 400 companies found that over two-thirds (69%) of companies intend to apply a pay freeze for 2012, while about 5% expect to reduce basic pay, by a median of 9%. Across all respondents the average expected change to basic pay rates is projected at +0.4%. Almost a quarter (23%) of companies expect to increase basic pay rates, by a median of +2%, with over half (58%) of those expecting improved productivity, seven out of ten (72%) improved processes, just under half (48%) increased workforce flexibility, and 65% expecting new product or service development. Two out of five companies (41%) expect their total pay bill to stay the same in 2012, with one in three (30%) expecting their total pay bill to increase, by a median of +2.5%. A quarter (24%) of companies expect their total pay bill to decrease by a median -7%.

IBEC director Brendan McGinty said: “Job protection and creation remains the priority for most businesses. This means pay restraint nationally and an unwavering focus by Government on restoring competitiveness. Companies are focused on getting costs back in line with our trading partners. This is vital if we are to restore our economic fortunes.

“Recent EU data shows that Ireland was the only country to register a drop in hourly labour costs of 1.1% last year and our inflation rate at only 1.7% is the second lowest in the Eurozone, but much more needs to be done. Wage levels remain about 15% higher than the EU 15 in 2011.

“Many companies operating in the domestic economy are still struggling to survive. Alongside the current plan for austerity, we need a clear strategy to grow the economy and to sustain jobs. Ireland has lost 300,000 jobs over the last four years and we have a shockingly high unemployment rate. This is where our efforts must focus,” concluded Mr McGinty.