Capita freezes pay for thousands of staff in cost-cutting drive

capita

Outsourcing giant Capita has frozen pay for thousands of workers across the UK as it seeks to stem losses by cutting costs.

The pay freeze will be enforced over six months, an email seen by The Telegraph shows, as new chief executive Adolfo Hernandez confirmed that April’s pay rises had been delayed until October.

In a note to staff, Mr Hernandez said Capita had made “difficult decisions when it comes to pay” because of the company’s poor financial performance.

A failure to hit targets will mean executive bonuses will also not be paid out for the last financial year.

He said: “Simply put, the great work we do is not showing in the numbers. This is not the position I wish we were in, and one I hope to not be in again.”

The internal memo comes after the company told investors on Wednesday that it planned to save £60m this year, and a further £100m by 2025.

Capita, which runs the BBC’s TV licence scheme and the Army’s recruitment programme, reported full-year losses of £107m for 2023 after revenues fell by 6pc to £2.8bn.

It also revealed that a cyber attack against its pensions division last year had cost the business £25m.

Shares in Capita fell by more than 20pc following Wednesday’s update, meaning the business is now worth just £270m.

The pay freeze is likely to provoke further anger from staff and unions after Capita cut 900 jobs as part of redundancies announced in November.

The company, which employs more than 40,000 people, has already told workers that it is pulling out of a scheme to support the “real living wage”, impacting some of its lowest-paid workers.

The Communication Workers Union called the decision to abandon the pay pledge “callous”.

Mr Hernandez, a former Amazon executive, said the voluntary increase of 10.1pc was “not something we could commit to”.

Workers on minimum wage will still see their salaries rise to comply with the law, while workers in the UK will be paid a minimum of £11.56 to comply with the national living wage.

On Wednesday, Mr Hernandez told investors the company needed to deliver a “rapid reduction” in costs to turn around the business. In the email to staff, he said: “Delivering performance improvement is going to take grit and determination, but I’m confident it can be done.”

A Capita spokesman said: “As outlined in our full year results, we need to be more competitive to grow our business and we’ve had to make some difficult short term decisions to ensure we are better placed for the future. Our absolute priority is to deliver improved performance, which will enable us to reward our people for their hard work.”