Latest research from CIPD and the Adecco Group has confirmed that UK employers are exploring a variety of options to stave off and minimise redundancies in response to the COVID-19 crisis. According to their latest survey, pay cuts (18%), bonus cuts (26%) and freezing or delaying pay increases (33%) are all tactics that employers are using in response to the current pandemic.
More than four in ten (42%) employers have implemented recruitment freezes, reveals the survey. The proportion of organisations adopting a recruitment freeze is significantly higher for the private sector (47%) than the public sector (22%); especially in hospitality (65%), business services (54%) and IT (52%). Many employers are exercising similar wage flexibility as the previous recession of 2008/09, which should help preserve some jobs. Pay cuts appear to be more prevalent in the construction (44%), business services (30%) and hospitality (29%) sectors.
The survey also revealed that employers across all sectors intend to keep a tight rein on pay increases over the next 12 months. Those who plan pay reviews expect basic pay to increase by 1%, much lower than the 2% median increase expected this time last year. Median basic pay expectations in the private sector have increased to 0.8% from 0% three months ago. While there’s a modest rise in median basic pay expectations in the private sector, overall improvement is hindered by a relatively large proportion of employers able to predict the outcome of a pay decision over the next 12 months that plan to introduce wage freezes in the 12 months to June 2021 (40%).
CHALLENGING TIMES FOR PAY & JOBS
In fact, the survey of more than 2,000 employers points to a ‘challenging autumn’ for pay and jobs. UK job prospects remain weak, with one in three (33%) organisations expecting to cut jobs in the third quarter of 2020, according to CIPD and Adecco Group. Their latest quarterly Labour Market Outlook report shows a 50% increase in the number of organisations expecting to cut jobs compared to the spring report, rising from 22% three months ago to 33% in this latest report. Twice as many private sector employers (38%) expect to make redundancies compared to the public sector (16%).
That said, the survey found that overall hiring intentions have increased slightly, with almost half (49%) of employers expecting to take on new recruits in the next three months, compared to 40% last quarter. However, this confidence remains “well below levels seen in previous years”. It also found that employment confidence has fallen in all three sectors of the economy: private, public and voluntary.
The report’s 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 also fallen from -4 to -8 over the last three months. This is the lowest figure since the survey was conducted using the current methods (February 2013), according to the UK’s professional body for HR and people development.
MORE REDUNDANCIES EXPECTED
“Hiring confidence is rising tentatively, but this probably won’t be enough to offset the rise in redundancies and the number of new graduates and school leavers entering the labour market over the next few months. As a result, this looks set to be a sombre autumn for jobs,” explained Gerwyn Davies, Senior Labour Market Adviser at the CIPD. “This is the weakest set of data we’ve seen for several years. Until now, redundancies have been low – no doubt due to the Job Retention Scheme – but we expect to see more redundancies come through this autumn, especially in the private sector once the scheme closes.”
This will likely be “accompanied by a pay squeeze for workers, which is actually to be welcomed to help preserve jobs despite any modest fall in real wages in the private sector,” Davies added. “This could be an important factor in limiting large-scale job cuts, as it was in the last recession. We urge organisations to do all that they can to keep employees in work and only make redundancies as a last resort, exploring all other options first. This could include freezing recruitment, reducing hours or restricting overtime, or cuts to bonuses and deferring salary increases.”
Adding to his comments, Alex Fleming, Country Head and President of Staffing and Solutions, the Adecco Group UK and Ireland, stated: “This latest report shows a mixed picture with regards to the status of the current labour market. Redundancy intentions have increased by 11% compared to the previous quarter but, more positively, nearly half (49%) of UK employers are planning to recruit over the next three months, which could be an indication that businesses are reshaping for the future.”
Click here for a copy of the report.
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