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Is worst over for local jobs market?

A quarter of large companies in Northern Ireland expect to cut their workforce again this year and over half are planning salary freezes, but the worst could be behind us.

That is the assessment of the local jobs market revealed in a new survey by global human resources consultancy, Mercer.

The study, carried out at the end of 2009, showed that of 126 private sector organisations across the island of Ireland employing on average over 450 workers, 27% of Northern Irish firms were planning reductions in their employee numbers this year.

However, while the figure is worrying, that is a marked improvement from 2009, when Mercer said 65% of organisations in Northern Ireland made staff cuts.

The survey comes after the most recent official figures showed the number of people joining dole queues in the province jumped by 1,400 in January to 56,100 and economists predict unemployment will keep rising in the first half of 2010. Yesterday 84 jobs went at Capita in Belfast.

Mercer’s research found that 73% of Northern Irish companies had reduced their payroll costs in 2009, on average by 10%. Around 32% of those surveyed expected to make further cuts this year.

It found the most popular measures being taken to cut costs were hiring freezes, voluntary redundancies and a reduction in overtime and incentive payments.

Over half of the firms (52%) expect to freeze salaries in 2010 and among the rest, the median pay increase across all employee groups was only 2%. Patrick Robertson, a senior consultant at Mercer in Belfast, said: “Companies have taken a number of steps to reduce their costs, including changes in their rewards and hiring policies. More drastic measures such as compulsory redundancies and pay cuts have been less common, particularly in the larger organisations.

“In many cases, we’re seeing |a continuation of the salary freezes that many companies instigated in 2009.”

Some 60% of organisations reported hiring freezes or voluntary redundancy programmes last year and 36% of organisations cut back on overtime.

This year 23% forecast further reductions in overtime, but only 18% of companies predict actual pay cuts.

A comparison of the survey results in Northern Ireland with similar results in the Republic showed that Northern Irish companies were quicker to react to deteriorating economic conditions, with more of them reporting salary freezes in 2009.

However, for 2010 more organisations in the Republic are projecting salary freezes than in the Northern Ireland.

Part of the difference is likely to have been driven by national wage agreements in the Republic, and the fact that northern-based companies reviewed their salaries later in the year, allowing more time to react.

In addition to cuts in overall payroll costs, 59% of organisations in Northern Ireland reported changes being made to at |least one of their employee benefit plans and policies in |order to reduce costs, including |pensions and training and development.

“The predictions for 2010 show that the market will continue to be challenging, but it would appear that the worst of the impact was probably felt in 2009,” said Mercer’s Mr Robertson.

“There is an expectation that things will pick up there, though it is obviously reliant on the global economy improving and the peace process being maintained.”

Ulster Bank economist Richard Ramsey said there are a number of factors that will influence the employment market this year.

For example, he said that while the retail sector has so far been largely insulated from recession, an expected drop in cross-border trade will leave it more reliant on domestic consumers facing a squeeze from rate rises, pay freezes and VAT increases.

“The retail and public sector will bear the brunt of Northern Ireland’s service sector job losses in 2010 and 2011.

“While the large UK retail multiples are expected to continue to unveil further job announcements this year, Northern Ireland’s overall level of retail employment will continue to fall.

“Northern Ireland’s wider consumer sensitive sectors such as hotels and restaurants are likely to continue to shed jobs in 2010 and 2011,” he said.

The economist added that the construction and manufacturing sectors had experienced the majority of job losses during the recession, but the public sector is also likely to experience cuts in the future.

“It should be remembered that the vast majority of the job losses experienced within the manufacturing sector will not come back.

“As a result, Northern Ireland’s manufacturing sector will not be a source of employment growth in the future.”

He added: “That said, certain manufacturing firms, such as those within the pharmaceutical sector, will continue to be the |exception and create jobs in |niche areas.”