IRS analysis of pay prospects for the coming year (subscription required) finds that private sector pay awards may pick up to some extent if the anticipated economic upturn gathers pace.

Pay freezes are likely to remain a feature of private sector pay for some time, with more than one-quarter (27.3%) of pay groups unlikely to receive a pay rise over the coming year. But pay freezes may no longer be the dominant award. Overall, private sector employers forecast a median pay award of 2% for 2009/2010.

This reflects a more optimistic outlook among private sector employers as regards trading conditions. As IRS notes:

[E]mployers may be reaching a turning point where pay rises can be expected to show signs of gently picking up as and when the economic background improves in the bargaining round ahead - particularly if inflation starts to rise.

However, the anticipated resurgence in private sector pay awards is contingent on economic recovery. IRS says many employers "may continue to freeze pay if business conditions do not improve".

While private sector pay awards could recover, it is all but certain that the ongoing stability in public sector pay awards will disappear over the coming year.

No matter who wins the 2010 general election, things look set to turn distinctly stormy with regard to public sector pay. Public sector workers are likely to see their 2010 pay awards radically constrained by the recession and by the Government's need to make radical public spending cuts.

Chancellor Alistair Darling's Pre-Budget Report 2009 will be published later on 9 December 2009. We will be live-blogging Darling's Pre-Budget Report 2009 speech here on Employment Intelligence on the day that it is delivered.