Enough is enough: Employers are running out of steam on ability to hike pay or make well-paid job offers
Close to half of UK employers report having vacancies that are hard-to-fill, and almost two thirds anticipate problems filling vacancies in the next six months.
The most common response made in the past six months by employers with hard-to-fill vacancies has been to increase pay, according to new research from CIPD, the professional body for HR, shared with Morning Wire today.
However, only a quarter of organisations plan to raise wages in response to recruitment difficulties in the future.
This suggests that organisations may be approaching their limit on this ‘quick win’ strategy and are exploring alternative options, such as upskilling people and flexible working, to attract and retain people.
In its latest quarterly Labour Market Outlook report, the CIPD surveyed more than 2,000 employers across all sectors of the economy in April 2022 about their hiring, pay and redundancy intentions for the second quarter of 2022.
Pay intentions
For the second consecutive quarter, median basic pay increases are expected to be 3 per cent which means they are sustained at the highest level recorded since the report series started in its current form in early 2013.
Pressure on pay could ultimately feed into higher prices for products and services. Indeed, 35 per cent of employers said that they had raised prices in response to cost pressures.
While raising pay is still the number one means to address hard to fill vacancies, organisations are exploring other working practices that stand to boost job quality for both employers and individuals over the long term.
For example, 37 per cent of employers said they planned to upskill people and 28% plan to advertise more jobs as flexible.
Just 27 per cent of organisations plan to raise wages in response to recruitment difficulties in the future.
Hiring and redundancy intentions
Employers remain confident about their employment intentions for the coming quarter. Recruitment intentions remain above pre-pandemic levels and almost three quarters (74 per cent) of employers said they plan to recruit in the next three months.
Only 6 per cent of employers plan to decrease staff levels over the next quarter.
However, while recruitment intentions remain strong, candidates remain elusive as the unemployment rate continues to fall to incredibly low levels.
There has also been an increase in people leaving the labour market altogether. The CIPD is warning that a lack of candidates will likely start to drag on growth, so it’s crucial that employers upgrade the skills of the existing workforce, including managers, to boost individual and organisational productivity.
“The prospect of bumper pay awards will take the edge off high inflation for some workers, but it will still be strongly felt by many people struggling with the rising cost of living,” said Jonathan Boys, labour market economist for the CIPD.
Boys told Morning Wire that “employers are running out of steam on their ability to increase pay any further, so they’re switching their focus to retention and keeping their existing workforce happy.”
“If the ability to award pay rises is limited, employers can look at the total employment offer,” he continued, adding that “fginancial wellbeing support can make a difference, as can revisiting the mix of benefits offered to make sure they work hard for employees, especially the lowest paid.”
This includes designing jobs that include ample flexible working options.
“A combination of pandemic induced re-evaluation and a tight labour market have pushed flexibility to the fore. Right now, it’s a candidate’s market and that means new recruits have more power to dictate the terms that work for them.”
“After years of falling employer investment in training, it’s encouraging to see a renewed focus from employers on upskilling the existing workforce as part of efforts to address recruitment challenges,” Boys noted.
“Reform of the apprenticeship levy could do even more to boost the latent appetite of employers for investing in training and development, as they could spend the levy in a way that best suits their training needs,” he concluded.