Employers ‘running out of steam’ on pay rises as talent shortages continue, CIPD finds

Experts urge firms to focus on revising their benefits offerings as report reveals less than a third expect to increase wages to attract new hires

FG Trade/Getty Images

Employers are struggling to increase pay any further in a bid to attract talent, the CIPD has  warned, as nearly half of firms say they are struggling with hard-to-fill vacancies.

The professional body’s latest Labour Market Outlook found 45 per cent of UK employers currently have vacancies they are finding hard to hire into, with 65 per cent anticipating they will have hard-to-fill vacancies in the next six months.

However, while employers had until recently been increasing wages in a bid to attract talent, only just over a quarter (27 per cent) of firms said they planned to increase pay in the future.

Omission of employment bill from Queen’s Speech a ‘missed opportunity’

Insecure and low-paid work costing taxpayer £10bn a year, union warns

Businesses regret half of new hires amid skills shortage, poll finds

This was down from 44 per cent of employers who, over the previous six months, cited pay increases as a solution to hiring difficulties.

Jonathan Boys, labour market economist at the CIPD, said that the figures suggested employers were “running out of steam on their ability to increase pay any further”, and were instead focusing on retaining existing staff.

“If the ability to award pay rises is limited, employers can look at the total employment offer,” said Boys, suggesting that revising benefits offerings and offering financial wellbeing support could make the difference for employees.

Get more HR and employment law news like this delivered straight to your inbox every day – sign up to People Management’s PM Daily newsletter

He added that firms needed to ensure they had “ample flexible working options”. “Right now, it’s a candidate’s market and that means new recruits have more power to dictate the terms that work for them,” he said.

The Labour Market Outlook, which polled more than 2,000 senior decision-makers in UK businesses in March and April, projected the median basic pay increase for the next quarter would be 3 per cent: the same level as the previous quarter and the highest since the reporting began in 2013.

Private sector employers were more likely than their public sector counterparts to say that they will award basic pay increases (43 per cent and 26 per cent respectively).

Similarly, public sector employers were twice as likely as those in the private sector to say they had no plans to change pay and benefits to improve recruitment and retention (38 per cent and 19 per cent respectively).

Instead, across both public and private sector organisations, 37 per cent of those with staffing shortages said they planned to upskill their existing employees, while 28 per cent planned to advertise more of their jobs as flexible.

Shazia Ejaz, director of campaigns at the Recruitment and Employment Confederation (REC), said it was no surprise that employers were struggling to hire, and that high inflation rates would affect the way employers dealt with continuing staff shortages. “Enhancing flexibility, inclusion and training opportunities are important elements of a successful hiring strategy” she said.

The CIPD report also found that three-quarters (74 per cent) of organisations planned to recruit in the next three months, with just 6 per cent saying they intended to decrease their staffing levels.