The average pay rise for employees in businesses in the last quarter was between 2-3% - less than inflation - according to data released by IDS.

The survey showed that just 20% of employees received an increase worth 3% or more and that one in five employees saw their pay completely frozen.

"The modest loosening of pay policies that we have seen across the private sector during 2010 continues," said Ken Mulkearn, editor of the IDS Pay Report.

"The level of settlements reflects the broad recovery in profitability and higher inflation to some extent as well. If these indicators remain on track, in 2011 we might see 3% emerge as the central figure for pay budgets."