Rolls-Royce freezes the pay of 8,000 managers as it gears up for a challenging 2017
Rolls-Royce has frozen pay for around 8,000 managers, about 4,600 in the UK, as the company prepares for a challenging year ahead.
Losses at the aeroplane engine maker were worse than expected last year as it racked up a £4.6bn loss before tax.
Read more: Rolls-Royce made its largest ever loss last year
City A.M. understands that while staff have been informed they will receive a bonus for 2016 (the first in three years), payment of the salary increase for the majority of managers will be deferred until September.
A Rolls-Royce spokesperson said:
We have taken the tough decision to delay this year’s annual pay increase from March to September for the majority of management grades, subject to some local variation.
We have maintained reasonable increases for the last few years and this will enable us to continue to invest in the programmes and capabilities that will make us a more resilient business.
Our intention would be to return to a normal cycle in 2018 assuming our medium term expectations are unchanged.
Rolls-Royce will pay a bonus for 2016 because the firm outperformed on an underlying basis, but is postponing the managers' salary increase due to the tough year expected ahead.
Underlying profits for the firm fell to £813m, down from £1.4bn in 2015, though that was less of a drop than many analysts had forecast.
Read more: Most HSBC managers won't get pay rises in 2016
The pay freeze is only for management, and includes executives, while other employees will receive salary increases as usual from 1 March.
The salary deferral was included in cash forecasts for 2017, as the firm targets free cash flow similar to last year's £100m.
Chief executive Warren East has been looking to cut costs amid major restructuring plans. Back in September, Rolls-Royce said it was chopping 200 jobs as part of this. East said at the time he expected to make savings worth as much as £200m from this year. The firm has since said those savings are on track.