Thirty-five percent of UK organisations that responded to the Aon Hewitt 2013 Salary Increase Survey – Winter Update, reported that they will either implement redundancies this year or consider introducing them.

With the exception of Greece, this is a higher percentage than any other country covered in the overall European study. Of those organisations considering redundancies, over 62 percent were in service based industries. Andrew Macleod, leader of Aon Hewitt's pay research practice in the UK said: “This high potential figure for redundancies may stem in part from UK organisations feeling that they continually have to adapt and reorganise to remain competitive in what is still a volatile economic environment. By contrast, the same organisations are signalling that increases in salary budgets are holding strong at a rate of three percent, but with marked differences between industries. “At a sectoral level, it's notable that while the first few weeks of 2013 have featured bad news for some traditional high street stores, over two-thirds of retailers in our survey said that they are actually planning to increase payroll spend and recruitment activity this year. It may be that now rather than all organisations simply reflecting a uniform pattern of overall economic growth and decline, we are beginning to see a more fundamental change in which there are big variations by both sectors and companies as they focus on the three 'R's, recruitment, restructuring and redundancy.”

Andrew Macleod continued: “We are seeing some mixed messages, and some of them may offer good news to come. The survey findings suggest that the impact of the overall economy will not be as deep as the headline figure on redundancies might indicate. 94 percent of organisations said that they expect to increase their wage bill or at the very least maintain current spend. Organisations seem to be increasingly aware that they have to ensure that their best people are paid well and get decent salary increases, even if they have to freeze pay generally for their staff.” Similarly, almost a third of organisations expect recruitment activity to increase this year. It is also encouraging that only six percent of the UK organisations surveyed are planning a hiring freeze. This is lower than most markets across Western Europe and the lowest figure we have reported for the UK since the beginning of the global economic downturn.”

Pay freezes have increased from 7.3 percent of organisations in 2012 to 13.5 percent of organisations in 2013. Pay budgets are broadly stable (albeit with a slight decline) at three percent. This is in line with RPI of three percent. Almost half of organisations are now primarily setting their salary budgets in order to remain market competitive. A significant minority (29 percent) set the budget based on business performance. The highest concentration of pay freezes is expected in the Construction and Engineering industries. No pay freezes were being considered by organisations within Commercial Real Estate, Pharmaceutical, Energy, Insurance and Food and Beverage industries. Only six percent of organisations expect their wage bill to decline in 2013 while 60 percent expect it to increase.