Managers 'should work out pay levels individually'

People with management skills must negotiate pay levels and any increments on a one-on-one basis with workers, the Federation of Small Businesses (FSB) has advised.

John Wright, national chairman of the business group, noted that the recession was making cashflow problems worse and that some firms are coming under increasing financial pressure.

He added that raising pay levels through initiatives like the national minimum wage could add to organisations' bills which they might not be able to cope with during the downturn.

"Businesses should be free to negotiate pay levels with staff individually according to what is affordable during these tough times, rather than keep up with a one-size-fits-all pay rise," Mr Wright said.

"The minimum wage increase will add hundreds of pounds to the employer's wage bills and could lead to employers having to reduce hours and possibly even cause further redundancies."

Earlier this week, the government raised the national minimum wage of £5.73 per hour by 7p. The changes will come into effect in October.