Sean O'Grady and Jonathan Brown: 'Imaginative companies' try to keep skilled staff

Increasing numbers of companies are imposing pay freezes, deferring wage settlements, offering part-paid "sabbaticals" and even cutting pay in an attempt to preserve skilled workforces as they try their best to survive.

The Engineering Employers Federation (EEF) said yesterday that a quarter of industrial companies deferred wage settlements or froze pay in the three months to November. However, the more radical option of cutting wages, accompanied by a reduction in working hours, is being pursed by a growing number of companies. Corus, the steel maker owned by Tata of India, is still in negotiations with the unions over a deal that would see 10 per cent lopped off pay and hours for 25,000 workers at the Llanwern steelworks at Newport, Gwent.

It follows the successful example of JCB in the Midlands, where workers, backed by the GMB union, agreed to take a cut in wages of £50 a week to help save 322 jobs. This week employees at Rangemaster in Leamington, which makes Flavel gas cookers, agreed to work a 34-hour week rather than one of 39 hours, with a proportionate drop in wages, to secure 65 shop floor posts. A spokesman for the EEF said: "The speed and severity of the downturn has meant that companies are having to consider all possible options to avoid laying off skilled employees... including options such as reducing pay that under normal circumstances would be considered unpalatable."

Such imaginative moves are also a result of a legal obligation on managements to make every effort to avoid compulsory redundancies.

The hard-hit auto industry has also been putting workers on short time: Nissan, Honda, Mini, Bentley, Ford, Land Rover and Jaguar are among those affected. But no workers have taken up Vauxhall's offer of a nine-month sabbatical on less than a third of normal pay. A union source at the General Motors-owned plant at Ellesmere Port in Cheshire, which employs 2,200, said: "We have had a few tentative inquiries, but so far no one is prepared to actually take it."

Meanwhile, the Financial Times is encouraging job sharing and part-time working, while 500 staff at City brokers CLSA Crédit Agricole have agreed to take a voluntary pay cut of up to 25 per cent. City bonuses are likely to be slashed this year, in effect a salary reduction.

So far, though, few bosses have tried to repeat the pre-Second World War practice of reducing pay while increasing hours, a move that triggered the General Strike of 1926 and the slogan "Not a penny off the pay, not an hour on the day".