Employment growth set to continue but pay intentions remain subdued for most workers.

CIPD/the Adecco Group research released.

The latest Labour Market Outlook from the CIPD and the Adecco Group suggests that while Britain’s jobs boom is set to continue in the next quarter, trends have yet to translate into significant salary increases for all but new starters and those with key skills. As recruitment and retention challenges grow, employers are increasingly flexing their recruitment practices and drawing on a wider talent pool to fill vacancies. The Labour Market Outlook is a forward-looking indicator based on a survey of 2,182 employers on their recruitment, redundancy and pay intentions for the second quarter of 2019.

Despite rising recruitment and retention pressures, median basic pay expectations in the 12 months to March 2020 remain at 2 per cent. However, pay expectations have fallen back in the private sector from 2.5 per cent to 2 per cent and have risen in the public sector from 1 per cent to 1.5 per cent. Inflation is continuing to put upward pressure on pay for some organisations. Recruitment and retention difficulties are also a key factor in driving pay decisions, affecting new starters and key staff in particular. More than half of employers (53 per cent) said they have increased starting salaries for at least a minority of vacancies and one in four (28 per cent) have increased salaries for the majority of vacancies in response to recruitment pressures.

In addition to hiring challenges, a third of employers (33 per cent) said that it has become harder to retain staff in the last 12 months, particularly in the public sector (42 per cent). In response, over half (54 per cent) of organisations have increased salaries in some capacity and one in four organisations (25 per cent) have increased salaries for key staff only.

Britain’s jobs boom is set to continue in the short term. The report’s net employment balance – a measure of the difference between the proportion of employers who expect to increase staff levels and those who expect to decrease staff levels – has increased from +20 to +22. Employment growth will continue to be driven by the private sector which has increased from +22 to +25 in the last quarter. The report shows that confidence is highest in business services (+39), construction (+36), healthcare (+31) and ICT (31 per cent).

However, buoyant demand for staff is creating recruitment challenges. Two in five (41 per cent) employers say it has become more difficult to fill vacancies in the past year. Three in five (61 per cent) employers said that at least some of their vacancies were proving hard to fill.

“The majority of UK workers are long overdue a meaningful pay rise. However, many workers will remain disappointed with their pay packets until there are significant and sustained improvements to productivity,” said Gerwyn Davies, senior labour market adviser for the CIPD. “Organisations need to give much greater consideration to the obstacles that are preventing their people from performing better at work. A greater focus on training, development and better people management is needed to lift the UK out of its current productivity crisis. One upside is that many employers are already investing in developing their existing workforce to plug skills gaps. Strengthening workplace training and recruiting in a more inclusive, flexible way will ultimately deliver higher performing and fairer workplaces.”

Alex Fleming, country head and president of staffing and solutions, the Adecco Group UK and Ireland added: “A skills-short market is not a new phenomenon in the UK; many of our clients have been operating successfully within this market for years. A lot of our clients are becoming increasingly innovative and agile in the search for talent. Organisations who are most effective in this market are those with sustained plans and programs that are aligned to their strategies and culture.”

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