Ways to cut wages
The debate now is not whether to cut pay but how to do it. British Airways asked its staff to work for no pay; now the CBI is proposing people are paid for doing no work.
Consistency, if not rules, would certainly help in this new regime of falling remuneration. Honda and other carmakers this year put their workers on basic pay for not working for up to six months; British Telecom is offering quarter wages to staff who take extended holidays.
The BA pay cuts were forced by financial necessity could the company fire an employee who voluntarily accepted a reduction to save the company if the problems persist. It would seem an ungrateful reward those workers who tried to help - but firing only those who refused a cut would be bad industrial relations. Other companies considering this route should at least make up the wages of the volunteers it subsequently sacks.
The CBI’s plan is that companies with surplus labour and tight cashflow keep unwanted staff on the payroll but give them only the equivalent of the state’s Job Seekers’ Allowance. The government would also pay the actual JSA of £64.30 too.
That almost certainly means a pay cut for the workers and effectively means the company is paying its staff a retainer for being available, but it avoids or postpones the lump-sum of redundancy payments. For the government, the cost is the same as it if was paying the JSA anyway.
But the main advantage for the government is that it keeps unemployed people out of the unemployment statistics. In the run up to a general election, and when unemployment keeps rising despite the recession ending, that might be the attraction that ensures the employers’ organisation’s plan is adopted.
Employers could still make staff redundant under the CBI scheme, during the wage-cut period or after, but the employers’ group is not looking for volunteers for its “alternative to redundancy”.
The CBI insists this is not a wage subsidy of the sort sought from government by the TUC (which are inevitably against the proposal). That is true only to the extent that it is a state subsidy not to work rather than a subsidy to work.
But with the chief executive of the Audit Commission, Steve Bundred, telling the public sector it must accept a pay squeeze of a pay freeze to share the pain with the private sector, lower pay is firmly on the agenda. The question now is how rather than whether.
