Employers adopt ‘business as normal’ approach to hiring, says survey

Both public and private sector employers are expecting staff numbers to increase in the final quarter of 2019, but many are facing challenges in filling roles which is leading to higher salaries, according to the latest Labour Market Outlook from the Chartered Institute of Personnel and Development [CIPD].

It notes ‘a surge of confidence’ among public sector employers on increasing both pay and staff numbers in the next quarter. Meanwhile, private sector pay award expectations have decreased, narrowing the gap between the public and private sector.

The survey of 1,016 UK employers was conducted in September 2019 and focuses on their recruitment, redundancy and pay intentions.

If finds employer hiring confidence highest in construction, administration and support services and healthcare, with a marked increase in hiring intentions among public sector employers, most likely as a result of Government statements on austerity.

Nevertheless, public sector-dominated industries record the highest incidence of hard-to-fill vacancies, with 75% of healthcare employers struggling to fill these roles, followed by public administration and defence (71%) and education (68%). Overall 67% of organisations who are currently hiring have hard-to-fill vacancies.

Overall median basic pay award expectations for the next 12 months remain at 2%. The survey found that 48% of employers predict a pay increase in the next 12 months. Inflation remains the largest factor behind pay increases of 2% or more, followed by market pressures such as recruitment and retention challenges.

The public sector continues an upward trend on pay award expectations, rising from 1.5% last quarter to 2% this quarter while private sector pay award expectations moved down from 2.5% to 2.2%.

While private sector pay award expectations have fallen, the proportion of private sector employers set to raise salaries in response to retention difficulties has increased from 65% to 70%.

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There has been a sharp increase in the proportion of public sector employers raising salaries in response to retention difficulties rising from 30% to 41% in the last quarter, says the CIPD. The number of public sector employers raising starting salaries in response to recruitment difficulties has also increased from 30% to 37%.

Where organisations are expecting salary increases of less than 2%, the three top reasons cited were organisations inability to pay more, followed by restraint on public sector pay and uncertainty about future access to the EU market.

Jon Boys, labour market economist for the CIPD, said: “Despite the political uncertainty, employers have held their nerve and adopted a ‘business as usual’ approach to their hiring needs. The UK’s jobs machine continues to deliver with businesses expecting staff numbers to increase in the final months of 2019. The easing of cost constraints on the public sector has seen hiring and pay expectations increase sharply in the past quarter, but healthcare employers continue to struggle with hard-to-fill vacancies.

“Lowered expectations about future wage growth in the private sector – where the majority of people are employed – are a worry and that suggest recent gains in pay won’t be sustained. Without a focus on productivity these gains are built on sand. A starting point is to focus on people management practices which can help workplaces get the most out of their people and unlock their productive potential.”

Meanwhile, the Living Wage Foundation has announced that the UK living wage will increase by 3.3% from £9 to £9.30 per hour, with the London rate increasing by 20p or 1.9% to £10.75. The Living Wage is not the same as the National Living Wage [formerly the minimum wage] set by Government and is set at a higher level. Participating employers, including companies such as Ikea, Aviva and Nationwide, have until next May to put the new pay rates in place. The Living Wage Foundation said the faster rise in private rental and childcare costs outside London was behind the UK rate seeing a bigger rise than the capital.

Sajid Javid, the Chancellor, has pledged to raise the current National Living Wage from the current £8.21 an hour to £10.50 in five years’ time, while Labour has pledged an immediate rise in the rate to £10 an hour if it wins the election.

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