Vodafone to freeze salaries and bonuses

Vodafone, the mobile phone giant which is set to post profits of nearly £12bn for the year to March, has scrapped pay rises for all its 10,000 UK staff, ditched bonuses and told its sales reps to keep their cars for longer, as it attempts to trim £1bn from the firm's costs.

Less than one month after Vodafone said it was axing 500 jobs in Britain, a confidential email from Guy Laurence, the chief executive of the firm's UK business, was sent to everyone in Vodafone UK detailing the pay freeze, described by Laurence as a "tough decision to make, but a responsible one".

In the memo, Mr Laurence says: "If we had agreed to a salary rise it would have forced us to increase the number of redundancies in the recent announcement." Vodafone would be "asking company car drivers and those with job requirement cars to keep their cars for longer," he said.

Changes would also be made to "bonus plans for the next financial year", with the incorporation of new targets based on profit shares.

A Vodafone insider said: "The management has totally shafted us. Morale is at rock bottom after this. Staff who have worked like hell this year to make sure the company can post huge profits have been stabbed in the back. If we foot soldiers are being told that we have to forego any bonuses and salary increases then I hope the board is doing the same."

According to Vodafone's latest annual report for the 2008 financial year, former chief executive Arun Sarin took home a bonus of £2.13m, while Vittorio Colao, Sarin's successor, pocketed nearly £1.3m in bonuses. Chairman Sir John Bond was paid £560,000, while each of the company's non-executive directors took home £110,000.

A spokesman for Vodafone said: "We can confirm that there will be no increase in salaries for staff at Vodafone UK for the coming year and that includes the management."

Vodafone said last month that job cuts at the telecoms group were necessary to allow it "to compete more effectively in the UK market". Retail staff were unaffected by the cuts, which largely fell on staff at the firm's Newbury headquarters, with 170 being made redundant.

It's believed that group board members will remain unaffected by the UK move.

Shares in Vodafone slumped to 120p a share last week – down from nearly 160p a year ago.

News of Vodafone's decision in the UK comes just days after the the mobile phone industry was plunged into crisis when Sony Ericsson issued a disastrous profits warning as the global appetite for handsets plummets.

The warning came after Finish mobile giant Nokia revealed plans to make 1,700 job cuts.