PRP forecast to cover 10% of workforce by next year

MORE than 2 million employees - a 10th of the private sector workforce - will be covered by profit-related pay schemes approved by the Inland Revenue by the end of the year, according to figures published yesterday, writes Roger Trapp.

The prediction by Ernst & Young, the accountancy firm, which has established more than 10 per cent of all registered schemes, comes as the IR published figures showing that in the quarter to the end of June the number of employees in the schemes rose 3 per cent to 1,856,000. The number of schemes increased 6 per cent to 7,486.

Experts predict that the last six months of the year will see bigger rises because most companies have their year-ends then. They say the number of schemes is more than 2,500 up on the same period last year and the number of employees up by nearly 700,000.

Ernst & Young claims its survey, based on an analysis of more than 750 schemes it has implemented, is the most comprehensive study of the practical application of PRP since it was introduced in 1987. It shows employers are increasingly seeing PRP as a way of keeping down payroll costs while maintaining staff motivation in the face of an improving job market and emerging skill shortages.

Employers are using PRP to give employees the equivalent of up to 7.6 per cent pay rises without adding to their pay bills.

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