UK jobs boom set to continue as employers shake off Brexit uncertainty

But CIPD research reveals significant pay increases still non-existent for most workers except new hires and key staff

The UK jobs boom is set to continue as businesses continue to shake off Brexit uncertainty, research published by the CIPD has revealed, but the tightening labour market is failing to shift pay. 

Last month, analysis by the Office for National Statistics (ONS) showed the number of people in work in the UK had reached its highest level since 1971, hitting 32.7 million. Meanwhile unemployment fell to 1.34 million, the lowest level since 1975.

However, according to the CIPD and Adecco Group’s Labour Market Outlook report, published today, this confidence has yet to translate into significant salary increases for all but new starters and those with key skills. 

The quarterly poll of more than 2,000 organisations found employers were more likely to recruit new hires than three months ago.

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 – went up from +20 to +22 over the previous quarter, with confidence highest in the business services, construction, healthcare and ICT sectors. 

But basic pay expectation in the 12 months to March 2020 held steady at 2 per cent despite the labour market squeeze. 

Gerwyn Davies, senior labour market adviser at the CIPD, said: “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.”

Recruitment and retention difficulties were 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 had increased starting salaries for at least a minority of vacancies and one in four (28 per cent) increased salaries for the majority of vacancies in response to recruitment pressures.  

Davies said organisations needed to give much greater consideration to the obstacles that were preventing their people from performing better at work, adding that a greater focus on training, development and better people management was needed to lift the UK out of its current productivity crisis.

The buoyant demand for staff was also creating recruitment challenges. More than two in five (41 per cent) employers said it had become more difficult to fill vacancies in the past year, while 61 per cent said at least some of their vacancies were proving hard to fill.

According to Alex Fleming, country head and president of staffing and solutions at the Adecco Group UK and Ireland, this was prompting employers to become “increasingly innovative and agile in the search for talent.”

“Organisations who are most effective in this market are those with sustained plans and programmes that are aligned to their strategies and culture,” she said. 

“Creating internal pipelines of talent is the optimal way to tackle skills shortages in the long run – it will allow employers to recruit the best junior talent and retain them into more senior and technical roles, without having to offer inflated salaries to attract new talent.

“Conversely, employers should also be aware that when candidates venture into the market looking for new employment, they will demand higher pay than they would from their current employer.”

Reacting to the report, Ben Frost, solution architect at Korn Ferry, said employers unable to increase salaries needn’t worry as they still had the ability to remain competitive.  

“Not all businesses are in the financial position to offer monetary rewards to attract and retain top talent,” he said. “However, for the most part, employees’ expectations have begun to shift and so money is no longer necessarily the most effective way of rewarding staff or appealing to new talent.”

Frost recommended companies look holistically at benefits beyond financial incentives in order to attract the best talent. From flexible working schemes for a better work-life balance, to robust career development programmes and creative working environments, he encouraged employers to effectively communicate their all-round employment offering.