Sunday 22 April 2018

Firms reluctant to cut pay for fear of losing good staff

New research from the Central Bank sheds light on why private sector firms are reluctant to lower wages.

New research from the Central Bank sheds light on why private sector firms are reluctant to lower wages.

The study looked at businesses in a number of EU countries between 2007 and 2008 and found that only 2pc had cut wages in the five years prior to the study. Though this doesn't take into account the effects of the volatile economic environment post-2008, it provides an interesting insight into why employers are reluctant to shed staff.

The study says the two main causes for avoiding wage cuts are fear that they will reduce morale and the danger that the most productive workers will leave.

Reluctance to let people go varies from country to country depending on the importance attached to labour laws. Firms whose employees are covered by trade unions or collective agreements were most likely to rank labour regulations as a major reason for avoiding wage cuts.

Irish Independent

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