Employee benefits may be needed to maintain staff morale in the public sector, as new analysis has revealed personnel’s pay may not return to where it was relative to the private sector for another four years.

The Institute for Fiscal Studies (IFS), which conducted the research, said this has happened because wages in the private sector reacted quickly to the recession but state salaries did not.

It will take two years of freezes on people’s earnings followed by two additional years of one per cent pay rises for public sector remuneration to return to its position relative to that of private businesses, the body stated.

Furthermore, the study revealed other differences between workers and how much spending cuts are affecting them.

There is no evidence that lower earners in the public sector have been getting a raw deal, with their pay premium and pensions still looking good.

However, individuals on higher state salaries are likely to lose out when changes to pensions come into effect, the organisation stated.

This could encourage government departments to use other staff rewards to show recognition for the hard work of top earners rather than a financial bonus.

Part of the move that will hurt people on higher salaries is switching retirement funds from final salary to career average payouts, which is better for workers on less money.

Generally, those in less well compensated jobs in the public sector have done well out of  the newly negotiated pension agreements, as they will be able to leave their jobs at the age of 65 with a higher yearly payment than they would otherwise have received, the organisation added.

Commenting on the findings of the IFS, general secretary of the Trades Union Congress Brendan Barber said the analysis only took into account “changes in scheme design”.

“If you take the package as a whole, there can be no doubt that many public sector workers may have to pay more, work longer and get a pension that will not keep up with the proper measure of the cost of living,” he stated.