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Employers are keeping a tight rein on pay, with half planning to freeze salaries.

However, the number of firms who say they are operating a recruitment freeze has dropped from 61 per cent in the spring to 37 per cent, according to research from the Confederation of British Industry (CBI).

John Cridland, CBI deputy director general, says: ‘The worst of the recession may be over but firms remain ultra-cautious about increasing pay. Market conditions continue to be very tough and growth in 2010 will be feeble, so pay is going to be squeezed for some time to come.

Of the 243 respondents, 66 per cent say they are now adopting flexible working patterns, compared to 46 per cent last year.

In contrast to the CBI poll, research from accountancy firm BDO recently suggested that when the upturn arrives the majority of companies will not be looking to hire more staff.