A third of all businesses plan to freeze pay this year, according to research by pay analysts IDS.

The firm's research found that while a third of companies are freezing staff pay among that business that are giving wage increases the average figure is 2.9%.

Although small businesses are freezing, or actually cutting pay this year, they have been warned that they will need to offer increased pay when the jobs market starts to recover.

"Most firms with zero awards in 2009 may return to increasing pay again next year. So, while prospects for the economy remain uncertain, many firms will be planning ahead for a possible recovery in 2010," said Ken Milkearn of IDS.