THE vast majority of Irish businesses are set to freeze or slash pay rates this year, according to a new survey.
Research conducted by the Irish Business and Employers Confederation (IBEC), which surveyed 400 companies, found that while some expect to hire in 2012, pay rates had to reflect reality.
Irish wages were significantly higher than other EU countries last year, it said.
"Job protection and creation remains the priority for most businesses," said IBEC director Brendan McGinty.
"This means pay restraint and an unwavering focus by government on restoring competitiveness.
"Companies are focused on getting costs back in line with our trading partners. This is vital if we are to restore our economic fortunes," said Mr McGinty.
IBEC's latest survey for the final quarter of 2011 found that more than two thirds (69pc) of companies intend to apply a pay freeze for this year. About 5pc expect to reduce rates of pay.
That is despite more than half of Irish companies (58pc) expecting improved productivity in 2012 and 65pc anticipating new product or service development.
Less than half of those surveyed (48pc) expected increased flexibility in workforces.
"Many companies operating in the domestic economy are still struggling to survive," said Mr McGinty.
"Alongside the current plan for austerity we need a clear strategy to grow the economy and to sustain jobs.
"Ireland has lost 300,000 jobs over the last four years and we have a shockingly high unemployment rate. This is where our efforts must focus."
IBEC contends that Irish wage levels remain about 15pc higher than the rest of the EU, excluding the accession states.
It added that, with inflation set to rise in 2012 following budget decisions to reduce the redundancy rebate and abolish employers' PRSI relief on pensions, labour costs are likely to increase and undermine efforts to regain competitiveness.
Last week the Morgan McKinley Ireland Salary Survey found that workers in one in five companies could look forward to a pay increase during the year.
While the majority of human resource managers and executives involved said they expected wages to remain as they are, 21pc said salaries could rise by between 1pc and 5pc in the coming months.