Wages rise as employers fight for talent in tough labour market

Average earnings are on the increase as UK firms continue to contend with a tight labour market.

That’s the view from jobs and recruitment experts, commenting on today’s employment figures.

The figures show the number of people in work hit 32.6m between October and December 2018, with an employment rate of 75.8%, the joint highest since records began in 1971, and an unemployment rate of 4% – the lowest since 1975. Meanwhile average earnings were up 3.4% in the year to December, unchanged from the previous month.

Pawel Adrjan, UK economist at global job site Indeed, said: “A year ago the average Briton’s spending power was stagnating… Now, as inflation slows to its lowest rate in two years, a series of strong rises in average wages has swelled both pay packets and workers’ spending power. 

“Rising wages are a by-product of Britain’s relentlessly tight labour market, which is still bumping along the ceiling of full employment. There are signs the market could get even tighter in coming months. Indeed’s data shows that the proportion of online searches for UK jobs coming from other European countries fell by 5% in the three years to January. While the latest quarterly data shows a pick-up in the number of both EU and non-EU workers, the Brexodus of talent remains a real risk.”

But according to Lee Biggins, founder and CEO of UK job board CV-Library, not all businesses are in the financial position to offer monetary rewards to attract and retain top talent. 

“For the most part employees’ expectations have begun to shift and so money is no longer necessarily the most effective way of rewarding staff or appealing to new talent.

“Companies need to look at benefits beyond financial incentives in order to attract the best talent. From flexible working schemes for a better work-life balance, to robust career development programmes and creative working environments, employers need to communicate the benefits associated with their brand.”

Meanwhile Matt Weston, managing director of recruitment giant Robert Half UK, said the low rate of unemployment is further proof of the strengthening of the “buyer’s market”. 

“Employees with in-demand skillsets are benefiting from competitive salary negotiations as businesses are paying more than they initially planned to secure their favoured candidate. This war for talent is also reflected in the most recent wage growth figures, which show a 3.3% rise, well above the current level of inflation. This trend is set to continue as employers look to plug a widening skills gap in the race to adapt to an increasingly digitised business landscape, which is already dramatically disrupting traditional business models and roles.”

Ben Frost, solution architect EMEA at global executive search firm Korn Ferry, said the figures once again confirmed strong employment growth up and down the country, which he described as great news for companies and employees. 

“The challenge, however, remains in competing for the right staff with the right skills. Not all businesses are in the financial position to offer monetary rewards to attract and retain top talent. 

“Companies need to look at benefits beyond financial incentives in order to attract the best talent. From flexible working schemes for a better work-life balance, to robust career development programmes and creative working environments, employers need to communicate the benefits associated with their brand.”

Also commenting, Recruitment & Employment Confederation (REC) director of policy Tom Hadley said: “Today’s figures once again highlight the resilience of the UK jobs market, with record vacancies and numbers of people in work. However, we cannot this for granted as our JobsOutlook data shows a significant downturn in businesses’ confidence in the UK economy, which is already impacting on future hiring intentions.

“On a positive note, the record number of vacancies shows that opportunities are there for jobseekers at present. The challenge in many sectors is finding the right candidates to fill these roles, which is why recruitment professionals are playing an increasingly pivotal role in supporting employers to innovate and adapt their hiring strategies to an uncertain and evolving landscape.”

Julia Kermode, CEO of The Freelancer & Contractor Services Association (FCSA), said that 71% of the quarterly increase in workforce came from self-employment (48%) or temporary employment (23%).

“This echoes other recent statistics suggesting that there has been a recent decline in the numbers of workers being placed into permanent roles. Uncertainty regarding Brexit is likely to be driving both the reluctance of UK plc to increase their permanent headcount, and also workers’ reluctance to move to a new employer.

“In contrast, as the uncertainty grows, we are seeing the flexible workforce of self-employed and temporary workers rise to the challenge and bring much needed skills to businesses on a contingent basis.

“This trend has been seen many times before, and in particular the UK’s flexible workforce was widely acknowledged as enabling our economic recovery post-2008.”

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