Almost a third (29%) of UK firms have already, or plan to impose, pay freezes, while the same percentage are reviewing the performance-related bonuses they offer to staff.

The ‘Employee Benefits Research 2009’, published today, found that 43% of managers claim they need to ‘motivate employees to maintain morale’ at this time. But a high number say they plan to implement bonus reviews and pay freezes.

Debi O’Donovan, editor, Employee Benefits, says: “Employers are treading a fine line at the moment. Costs need to be cut, but the only way organisations will get through this recession is with staff who are highly productive.

“Cutting pay causes resentment, but at the moment staff are taking it because they are afraid of losing their jobs.

“There is only so long you can run a company with staff who work hard because they are scared of losing their jobs. At some point, managers have to focus on motivating staff – and that is going to involve some creativity if they want to do that without running up high costs.”