HR has 'key role' in tackling UK's labour shortage as businesses invest in upskilling existing employees and automation

Experts say making jobs as attractive as possible is crucial, including pay and hybrid working

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HR professionals are set to play an important part as increasing numbers of businesses turn to internal training to fill the UK’s labour and skills gap, according to a CBI survey.

The annual Employment Trends Survey with Pertemps Network Group found more than two-thirds of UK businesses (71 per cent) have been hit by labour shortages in the last 12 months.

At the same time, 77 per cent of businesses believe access to skills threatens the UK’s current labour market competitiveness.

With the labour market unlikely to provide a solution in the near future, the survey found firms are trying to “narrow the gap” by turning their attention to training – nearly seven in 10 (69 per cent) that responded are investing in upskilling current workers.

Alongside this, 60 per cent of respondents say they are investing in technology and automation to “improve productivity and reduce reliance on labour”, 65 per cent are investing in leadership and management capabilities and 60 per cent in base pay.

As reported by People Management, the UK’s worker shortage hit 1.3 million last year, with some areas – including agriculture and hospitality – particularly hard hit.

The CBI survey, which was conducted between 16 August and 11 September with 263 businesses responding, reports that labour shortages are having a material impact on firms’ ability to invest, respond to demand and grow.

It found that:

  • More than a third (38 per cent) of businesses have been unable to grow and respond to new business opportunities despite demand due to labour shortages in the last 12 months

  • One in five (22 per cent) have had to hold back investment in other parts of the business and 12 per cent have shrunk due to shortages.

  • More than three-quarters of respondents (76 per cent) said the UK has become a less attractive place to invest / do business in the last five years. 

  • In five years’ time, more than eight in 10 (82 per cent) believe that access to skills will still be a threat to labour market competitiveness. 

People professionals who spoke to People Management are in agreement that HR has an important part to play in dealing with the current problems. Much of their focus is on making the job offer as attractive as possible.

Alan Price, CEO at BrightHR, said: “Taking some time to consider what employees and jobseekers are looking for in a job may be a good place to start for HR professionals and employers.

“Then they can reflect on how well their company offers what is being sought. It may not just be better pay and conditions, which are considered important, but work/life balance, flexible working, job security, benefits and whether the organisation is an inclusive employer may also be important to jobseekers and employees.”

Jim Moore, employee relations expert at HR consultants Hamilton Nash, urged firms and HR professionals to focus on making work as attractive as possible to employees and candidates.

He said: “Investing in upskilling employees is one tool that businesses can use to keep staff, but bosses need to look at the whole package they’re offering workers.

“Listen to your staff and see what’s important to them. This might be a hybrid working balance that’s swung too far towards being forced back to the office.”

He added: “For on-site roles, vacancies are limited to candidates who live within a reasonable commuting distance.

“Flexible working is hugely important to parents and people caring for relatives, and accommodating employees’ needs can sometimes be more valuable than a pay raise.”

A spokesperson for the Institute for the Future of Work focussed on HR’s role in enabling greater use of automation and AI.

They said: “It is pleasing to see so many firms investing in upskilling their workforces rather than focusing solely on investment in new technologies.

Our study of 1000 UK firms, published last month, found that HR professionals have a key role to play. Where there are ‘high engagement HR management’ practices, investing in automation and AI leads to better quality jobs.

“But work by leading economists is clear: productivity gains are not a given with automation, and our study found that where high-involvement HRM practices are absent, adopting automation technologies has a negative impact on job quality – with the attendant problems of workforce engagement and churn that that brings.”

Rain Newton-Smith, CBI chief executive said: “It is crystal clear that while labour shortages are making it more important than ever to focus on productivity, they are also making it harder to invest and grow, stifling the economic transformation needed to deliver sustainable growth.

“Businesses have been helping people get into work by increasing flexible working and making proactive investments in employee health, but with government support like expanding tax-free health support and subsidising the cost of occupational health services for SMEs, they can do even more.”

Newton-Smith added: “More often and more effectively adopting technology will be key to improving living standards. In doing so, we’ll need to help employees add to their skills.

“That’s why the government needs to go further with its skills reforms and turn the Apprenticeship Levy into a Skills Challenge Fund, unlocking firms to invest more capital in improving the skills of more workers than apprenticeships alone.”

With a general election looming, the survey found that many businesses want political parties to prioritise measures that will “drive productivity and sustainable growth”.

Some 82 per cent of respondent firms support introducing incentives for firms to invest in productivity-boosting technology and automation, 59 per cent want all skill levels permanently eligible for the Shortage Occupations List, while 62 per cent want an increase in the financial support provided through the Access to Work scheme to help employers to hire people with disabilities.

Future hiring, pay reviews and attractive employment packages

The survey found more firms than not are expecting their workforce to grow in the coming year - 31 per cent, against 16 per cent expecting a reduction.

Meanwhile, nearly half (46 per cent) are planning to increase pay either in line or above inflation for their next pay review. One in four (24 per cent) plan an increase below inflation.

The survey added: “Business continues to help employees manage the cost of living, with more than half (53 per cent) offering more flexibility to work at home to reduce transport and fuel costs, 42 per cent giving staff one-off bonus payments and just under a third (32 per cent) bringing forward or having additional pay reviews.”

In terms of attracting and retaining talent, investing in basic pay (66 per cent), training and development opportunities (53 per cent) and developing and communicating a strong purpose and company values (52 per cent) are seen as the most important.