UK: Universities struggle to afford pay rises

The news that inflation reached 5% in September could not have come at a worse time for universities already licking their wounds after investing more than £77 million (US$123 million) in collapsed Icelandic banks, reports The Guardian. As the final instalment of a three-year pay deal, universities had committed to increase pay from October by the same amount as the retail price index for September 2008 or 2.5%, whichever was greater. With RPI at 5%, this means institutions are facing much higher than expected wage bills. The latest rise means pay will have increased by 15% since 2006.

Some universities are already feeling the pinch. "The magnitude of the October pay increase will stretch the finances of all higher education institutions and some may be forced to phase or defer payment," says Jocelyn Prudence, chief executive of the Universities and Colleges Employers Association. "However, the rise will still be applied, albeit in stages, prior to August 2009. Institutions will need to make difficult adjustments to their planned budgets to meet these new costs and minimise job losses."

Universities can defer the pay rise by up to 11 months if they are in "serious financial difficulty". Already Bolton and Swansea universities have said they will defer October's rise. Others have yet to decide, and although the Russell Group of universities says its members will honour the pay rise in full, it is concerned.
Full report on The Guardian site