A tightening labour market, making it difficult to recruit the right skills, has caused pay expectations to edge up, according to the latest Quarterly Labour Market Outlook from the Chartered Institute of Personnel and Development (CIPD) and The Adecco Group.
The survey of more than 1,000 employers suggested strong growth in demand for labour in the second quarter of 2018, while there were also tentative signs that wage pressures may be increasing for employers.
Median basic pay award expectations for the next 12 months remain unchanged at two per cent. However, average (mean) basic pay expectations have risen from 1.8 per cent to 2.1 per cent over the last quarter.
“Employers looking to expand their workforces are likely to face growing headwinds as organisations find it more difficult to source the people and skills they need,” said Gerwyn Davies, senior labour market analyst for the CIPD. “This may explain why wage pressures are starting to increase following a prolonged period of relatively subdued pay growth. It could well be that employers are using higher starting salaries to attract the talent they need.”
Despite organisations’ positive employment growth intentions, the number of vacancies in the UK economy remains above historic average levels. The CIPD warned that the finding could be an indication that employers’ demand for skills may not be met by supply, with almost two-thirds of employers reporting that at least some of their vacancies are proving hard to fill. To tackle this issue, 28 per cent said that they are raising wages to overcome recruitment difficulties.
“Employers need to think more creatively about their workforce planning and talent pipelines to ensure that they can continue to access and develop key skills,” said Davies. “There needs to be a mix of attracting new and diverse talent as well as upskilling existing staff.”He suggested focusing on putting more effort into attracting and retaining older workers, women returning to work after having children and other disadvantaged groups in the labour market, as well as investing in the training and developing of existing workers.
Alex Fleming, Country Head of UK and Ireland and President of Staffing and Solutions, The Adecco Group UK and Ireland, added that although it was positive to see signs of wage growth after a period of stagnation, employers should highlight the full breadth of their employment package.
“Employers have more than one weapon in their arsenal; elements such as flexible working, modern workspaces, collaborative office spaces and inspiring management are all attractive to different segments of the labour market,” said Fleming. “It is time for employers to recognise talent as individuals and tailor employment packages accordingly to avoid missing out on key skills which will drive innovation and success.”
