More than half of UK employers are planning to freeze pay and put recruitment plans on hold, with the employment market set to take a “significant turn for the worst” in the next three months, according to new research from the CIPD and the Adecco Group. Their latest quarterly Labour Market Outlook report reveals that more than half of private sector firms are preparing to freeze pay over the next 12 months, while employer hiring intentions have fallen to their lowest levels since the survey began in 2005.
According to the report, just two in five (40%) of employers are planning to recruit in the three months to July 2020, compared to 66% during the winter of 2019/20. Additionally, the net employment balance – which measures the difference between the proportion of employers who expect to increase staff levels and those who expect to decrease staff levels – has dropped 25 points from 21 to -4.
“The state of the economy will have a big impact on earnings in the next 12 months. Employees should brace themselves for pay freezes or even pay cuts in the year ahead to help preserve jobs,” noted Gerwyn Davies, Senior Policy Adviser for the CIPD, the professional body for HR and people development.
REDUNDANCY INTENTIONS & PAY EXPECTATIONS
Median basic pay increase expectations overall are for a 1% rise, down from a 2% increase last quarter. Basic pay increase expectations in the private sector are zero, compared with 2% three months ago. Meanwhile, pay increase expectations remain unchanged in the public sector (1.5%) and voluntary sector (2%).
The survey of more than 2,000 employers also finds that employers’ redundancy intentions have only risen modestly compared to three months ago, thanks to the Government’s furlough scheme. More than a fifth (22%) of organisations expect to make some redundancies in the three months uo to July 2020; up 6 percentage points on the previous quarter. However, that number would have been significantly higher had the Government not introduced a Job Retention Scheme, with employers saying they would have made, on average, around 35% of their workforce redundant.
ADDITIONAL FINDINGS
The latest Labour Market Outlook also asked employers about their response to the current crisis and use of the Government’s Job Retention Scheme. Popular employer responses to the current crisis include extending homeworking significantly across the organisation (61%), recruitment freezes (44%), freezing or delaying planned pay increases (33%), introducing new flexible working arrangements (32%), cutting bonuses (29%) and cutting training budgets (27%).
Just over half (52%) of employers said they planned to take part in the Government’s Job Retention Scheme. Employers participating in the scheme expected, on average, to furlough 60% of their workforce. The proportion of the workforce being furloughed was expected to be highest in the hospitality (80%), retail (76%), construction (66%), administration and other support services (61%) and manufacturing (57%) sectors.
LABOUR MARKET TRANSFORMATION
Commenting on the survey results, Alex Fleming, Country Head and President of Staffing and Solutions, the Adecco Group UK and Ireland, stated: “The labour market is undergoing a huge transformation as a result of the current unprecedented circumstances. Recruitment activity has fallen significantly, but it’s positive to see that redundancy intentions have increased only modestly compared with the previous quarter.”
Organisations are doing all they can to keep employees in work “from reducing working hours, freezing hiring and cutting training budgets. Those employers taking part in the Job Retention Scheme have also been able to avoid making redundancies to what would otherwise have been more than a third of their workforce”, Fleming added. “As workplaces adapt to the new normal, it’s important that businesses take cohesive action to shape the future of work for the better. Employers must also continue to focus on creating a positive workplace culture for existing employees, to help keep them engaged and agile during this time of uncertainty.”
FURLOUGH BENEFITS
Adding to her comments, CIPD’s Davies stated: “While hiring and pay prospects have taken a significant turn for the worse, employers have so far held off from making large-scale job cuts. The Government’s Job Retention Scheme is undoubtedly a key factor, but many employers have also succeeded in achieving a step change in homeworking which, along with other steps to reduce costs, has avoided the need for large-scale redundancies.
“We are pleased that the Government has heard consistent calls from the CIPD to extend the job retention scheme and make it more flexible at the same time. The next challenge will be for Government to work with employers to design the best way to enable furloughed staff to work part-time for their employer, and gradually reduce reliance on the wage subsidy before the scheme ends in October.”
Click here for a copy of the report.
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