Employers urged to focus on retention as job vacancies hit another record high

Experts also warn pay growth could cause inflation increases, adding the UK must find ‘Goldilocks’ solution that still protects living standards

The number of job vacancies has reached a new record high, official figures have shown, with experts warning that employees are increasingly taking advantage of the jobseeker-friendly labour market to change roles.

In the three months from August to October, the number of job vacancies rose by 388,000 to a new record of 1.17 million, figures from the Office for National Statistics (ONS) have shown.

At the same time, the number of people on payroll increased by 160,000, while the unemployment rate fell by 0.6 percentage points to 4.3 per cent – nearly pre-pandemic levels.

The ONS said the increase in employment was largely driven by unemployed people finding work, and cautioned that those made unemployed when the furlough scheme ended in October might not yet be showing up in the figures as they work out their notice periods.

It added that the total number of job-to-job moves increased to a record high, largely driven by resignations rather than dismissals.

Responding to the figures, Gerwyn Davies, senior labour market adviser at the CIPD, urged employers to focus on retaining their existing workforce. “The figures show a surge in job-to-job moves driven by employees taking advantage of the tight ‘jobseeker-friendly’ labour market, and perhaps also people rethinking their career priorities after the pandemic,” he said.

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“In response, employers should focus on improving how they develop and retain their existing workforce to prevent or reduce skill and labour shortages,” Davies added, suggesting that firms needed to look at salary and consider things including the quality of line management; the availability of different types of flexible working; and the opportunities they provide to build skills and progress.

Separate research released yesterday by the CIPD found that nearly half of firms had turned to increasing wages in an attempt to find staff for hard-to-fill vacancies, and Davies warned this could have an impact on inflation.

“Substantial growth in the supply of labour over the past decade and more… has helped the economy avoid any pay-price spiral caused by an increase in the cost of living. However, the supply of EU workers and older workers is now at best plateauing,” Davies said.

“Raising wages has risen to become employers’ most popular response to hard-to-fill vacancies. Recruitment difficulties are thus becoming as big a concern to the Bank of England as any possible knock-on effects of recent higher inflation.”

This was echoed by Nye Cominetti, senior economist at the Resolution Foundation, who said the UK needed to find a ‘Goldilocks’ pay growth: fast enough to protect living standards, but not so fast as to generate excessive inflation”.

The ONS figures showed that, in the three months from July to September, annual growth in average pay excluding bonuses was 4.9 per cent.

Joanne Frew, head of employment law at DWF, said the “buoyant” labour market figures were the result of the gradual relaxation of lockdown rules that happened over the summer, and that this winter was likely to be very different to last year’s.

But, she urged employers to continue to plan ahead, reminding businesses that the government did have a ‘plan b’ that included a return to working from home that it would be willing to roll out if the situation worsened.

“Employers should be engaging with their workforce to ensure everyone feels supported and able to navigate the challenges ahead,” said Frew. “Against a backdrop of a war on talent, creating a foundation of trust within the workforce is more important than ever."