Half of businesses responded to talent shortages with upskilling, CIPD report finds

Only a quarter plan to increase wages in the future as cost of living bonuses are set to become ‘unsustainable’ for most firms

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Nearly half (47 per cent) of employers responded to talent shortages with upskilling, a report from the CIPD has found.

The CIPD Labour Market Outlook found that 46 per cent struggled with hard-to-fill vacancies, and, of those, more than half (53 per cent) said they expected this number to increase over the next six months.

In the survey of 2,018 senior HR professionals 44 per cent said their response to this challenge had been to increase wages, and a third (33 per cent) said they had increased the duties of existing staff. But only a quarter (24 per cent) said they planned to increase wages in the future.

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Jon Boys, labour market economist for the CIPD, said the cost of living crisis is as much of a challenge to employers as rising operational costs and the tight labour market. “Pay awards are expected to rise by the highest amount we’ve seen in our survey for 10 years, but they’re being outpaced by rising prices,” said Boys, adding that rather than “feeling the benefit of higher pay, most will face a real-terms pay cut”. 

David Morel, chief executive of Tiger Recruitment, said it was unlikely employers would increase wages as they have been over the past six months. “Many have already bumped up salaries in 2022 – acute talent shortages left them with little choice – so any pay raises they can afford to award in the future will be marginal,” he said, adding that employers should adopt flexible working. 

I would encourage any employers not currently offering their staff the ability to work from home to do so. It is possibly the most attractive, no-cost option they can provide,” he said. 

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The survey also revealed that more than a third (36 per cent) had increased wages in the last year to help with the cost of living. However, the expected median basic pay increase rose to a high of 4 per cent (and 5 per cent in the private sector), the highest since the CIPD started collecting data in 2012. 

Employers’ hiring intentions were also high, with more than two-thirds (69 per cent) expecting to recruit in the next three months – a return to pre-pandemic levels. Demand was strongest in public administration, healthcare, and information and communication. Only 16 per cent were planning vacancies, a slight increase from 13 per cent last quarter.

Tania Bowers, global public policy director at APSCo, pointed out that, as well as internal talent challenges, employers were struggling to access highly skilled global professionals given that the UK is still a “less than attractive” option for international contractors following Brexit, not to mention the recent political landscape. 

“If the UK is to level up its workforce, skills development needs to be a priority,” she said. “Achieving this will require the government to take the lead on a number of changes, including revamping apprenticeships to make them more flexible and appealing to all,” added Bowers, who said the upcoming autumn budget should hopefully provide stability.

However, Nel Woolcott, managing director of Anne Corder Recruitment, said small and medium-sized businesses will inevitably find cost of living bonuses “unsustainable”  as the cash “will run out at some point”. 

“Small and mid-size businesses that cannot offer across the board pay increases must look long and hard at the benefits they currently offer staff and ask themselves ‘are these benefits truly valuable right now, and do employees have a solid understanding of them?’,” said Woolcott.