Engineering giant Renishaw is reversing a 20 per cent pay cut for staff.

The Wotton-under-Edge precision tool maker imposed a 20 per cent pay reduction on all staff in February in a cost-cutting programme that has seen more than 400 jobs axed worldwide and 300 at three sites in Gloucestershire.

But after notching up £12 million in sales in September, 15 per cent up on the previous five months, the company announced it will restore half of the lost pay from October 1.

Full pay will be restored on New Year's Day, and if performance picks up sufficiently the group may backdate full pay for some or all of the period between the October 1 and the end of the year.

Chairman and chief executive Sir David McMurtry said: "I am pleased to announce these changes, as all employees in the Renishaw Group have responded magnificently to all the challenges and hardships they have faced.

"My thanks go to them all for their contribution and support."

Faced with plummeting sales in the first half of 2009, Renishaw's entire global workforce of 2,240 accepted lower salaries in a move that helped to reduce job losses at the firm.

But despite the drastic pay cut, Renishaw still axed 437 jobs worldwide.

The total included 308 redundancies in Gloucestershire – at Renishaw's HQ in Wotton-under-Edge and at smaller sites in Stonehouse and Woodchester – leaving a workforce of just under 1,100 in the county.

By Sir David's own admission the last financial year was one of the most difficult his company has ever faced. On top of the global recession which forced sales down, the company was hit by bad debts and costs for a legal action against a rival. As a result profits for the 12 months to June 30 fell by 89 per cent.

Renishaw makes precision cutting and measurement tools which size components for engines and machines.

As well as being used in manufacturing and engineering, its products have also helped to make instruments for brain surgery and to design a gold medal winning bobsleigh for the German Winter Olympics team. The company received its 13th Queen's Award for Enterprise earlier this month, for a new probe which performs 3D measurements on computer-controlled machine tools.