Salary increases on agenda for businesses

YORKSHIRE business leaders are continuing to keep a tight control on pay, despite almost two thirds budgeting for wage increases, a survey by accountants and business advisors BDO has revealed.

The findings were compiled following a ‘live’ voting session that formed part of the recent Yorkshire Report 2010 dinner hosted by BDO.

The poll of business leaders at the event showed that 56% of the region’s larger businesses are aiming to reward staff during their next pay settlements with a rise of less than inflation, while 35% will continue with pay freezes in order to battle through the continuing tough economic conditions.

Only 2% predict that they will be able to offer employees a pay rise of 5% or more.

However, none of the region’s business leaders felt that they will have to press for pay cuts in the coming wage round.

The Rt Hon Sir Richard Needham, former trade minister and currently senior independent director at vacuum cleaner firm Dyson, was guest speaker at the event.

Commenting on the poll, Sir Richard said: “I am surprised at the results because the Yorkshire Report shows that operating profit for the top 150 companies in Yorkshire is down by 54%, which would suggest that these businesses don’t have the money to award pay rises unless they increase prices, which is not a viable option in the current economic climate.

“The question is, however, are businesses worried that if they can’t pay market rates they will begin to lose staff? This goes back to the age old question of how to reward people, particularly during a recession, and a combination of solid base pay, bonuses linked to performance and a long term incentive plan, are options I believe that will encourage motivation and staff retention in these tough times.”

Sir Richard was part of panel of experts who debated the results from the live voting session, which included Stuart Hall, chief financial officer of TV set-top box manufacturer Pace, and Tim Clarke, corporate finance partner at BDO in Leeds.

Mr Hall said: “The concern of pay round settlements is a slightly different issue for Pace as we are a global company so face different challenges in each country.

“However, one thing that remains consistent across the board is the fact that everyone is focused on their cost base. As a result of this, I think we are seeing businesses thinking more innovatively in terms of rewarding staff and this is perhaps why no business leaders said they have to commit to pay cuts.”

Mr Clarke echoed Sir Richard’s comments: “I am also surprised that so many business leaders are looking to award pay rises this year or in the next round of settlements. Expectations for pay rises amongst employees are not high and most companies have pay freezes in place.

“However, I do think businesses need to show staff soon that there is light at the end of the tunnel and they should be considering alternative options to reward them for their loyalty and hard work during the tough economic period.”

The audience observed that we are possibly starting to see the first signs of industrial unrest, with strikes at BA taking place and potentially BT. Sir Richard predicted that this may get worse due to public sector cuts and we could be in for a summer of discontent.

However, it seems Yorkshire’s business leaders felt that employees are hurting after redundancies across the region, and didn’t want them to go through a repeat of last year’s tough conditions. The audience believed that a pay increase, even a very small one, would help to maintain staff morale and retain employees that have stood by them.

Concluding the evening, Ian Beaumont, managing partner of BDO in Leeds, said: “The Yorkshire Report 2010 revealed some interesting findings and the discussion around pay settlements had unexpected results for the panel. It was great to be able to open this up into a debate with our panel of experts and audience to get a sense of what positives and negatives Yorkshire’s leaders are facing, now and in the future.”

Copies of the Yorkshire Report are available by e-mailing Yorkshirereport@bdo.co.uk.