Starting salaries see record increase as recruitment spikes, report finds

But experts warn current trajectory is ‘unsustainable’ and urge employers to offer broader benefits in order to attract talent

Starting salaries have risen at a record rate and levels of permanent recruitment grew sharply last month, new research has found.

The latest Report on Jobs, conducted by KPMG and the Recruitment and Employment Confederation (REC), revealed that permanent starting salaries rose at a record rate in November, having risen each month since March 2021.

Temporary wages have also increased, with pay for short-term staff increasing for the ninth month in a row. 

The Permanent Salaries Index – where a score higher than 50 indicates an increase in salaries, while a score below 50 indicates a decrease – rose slightly between October and November, from 77.2 to 77.8.

The continued rise in the Temporary Wages Index slowed from the previous month across the UK as a whole, from 70.7 to 68.7, but the regional picture was different, with the Midlands seeing by far the sharpest increase, from 69.6 to 70.9.

The report also found a continued increase in permanent staff appointments for the ninth month in a row, with the Permanent Placements Index rising from 66.8 in October to 69.2 in November.

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In the survey, which drew its data from a panel of around 400 UK recruitment and employment consultancies, respondents attributed the rise to a continued demand for staff, but there were reports that low candidate supply had affected employers’ ability to fill vacancies.

The number of temporary appointments also increased, with London seeing the sharpest increase: the Temporary Billings Index rose slightly from 60.9 to 61, with London seeing the sharpest rise from 60.2 in October to 65.5 in November.

Claire Warnes, head of education, skills and productivity at KPMG, said employer confidence to hire was reassuring, but added that the current trajectory was unsustainable: “The pace of demand for workers is running far faster than supply can keep up with, which is draining an already diminished pool of available talent and feeding into inflationary pressures.”

“The priority must be to replenish the workforce and ensure businesses can access the talent they need. That means equipping job seekers with the skills that employers and new industries are looking for, increasing labour market flexibility and improving transport links.”

The report also revealed a continued decrease in the availability of permanent staff, however the decrease was the lowest in six months, with the Permanent Staff Availability Index rising from 27.4 in October to 31.2 in November. Half (49 per cent) of the survey respondents noted a lower availability of permanent staff, while just 8 per cent noted an increase. 

Similarly, temporary candidate numbers also decreased, albeit this represented the lowest decline in six months, with the Temporary Staff Availability Index rising from 28.9 in October to 31.3 in November.

Neil Carberry, chief executive of the REC, said that the figures were positive for those looking for a job because demand for staff has increased starting salaries and temporary rates of pay. “Hospitality will be in the forefront of any changes as we approach the festive season, of course, and the impact of high inflation will also be felt as purses tighten in January”, he said, but added that the Omicron variant may change the outlook for December.

“The labour market will remain tight for some time to come… this will put a premium on skills development, and the flexibility to hire overseas when necessary. These two issues will be critical ones for the government to address next year – both levelling up and delivering a global Britain rely on them.”

Jon Boys, labour market economist at the CIPD, said that employers need to offer broader benefits to potential candidates that go further than increasing starting salary. “To attract and retain staff they should also look at training, development and progression opportunities and ensure flexible working options are widely available,” he said.

“We also need significant changes to skills policy, starting with reforming the apprenticeship levy to a more flexible training levy, to boost employer investment in skills development.”