Employers are set to award record pay rises this year given the tough recruitment conditions, confirmed the UK’s professional body for HR and people development CIPD.
Employers anticipate making pay awards of 3% in 2022 to combat increasing recruitment and retention difficulties, revealed CIPD’s latest quarterly Labour Market Outlook. This quarter’s pay award figure is the highest since the survey was conducted using its current methods in the winter 2012/13 report. Companies are also responding to recruitment problems by providing more flexible jobs and more training and progression opportunities.
Over two-thirds (70%) of employers said that they plan to recruit in the next three months to March 2022 and just one in 10 (11%) plan to make redundancies. Redundancy intentions were significantly higher before the pandemic, at 16% in winter 2019/20.
HARD-TO-FILL VACANCIES
However, while recruitment intentions remain strong, almost half (46%) of UK employers report having vacancies that are hard-to-fill. Two thirds of employers (64%) anticipate problems filling vacancies in the next six months, with a third (33%) expecting these problems to be ‘significant’.
In response to recruitment challenges, in the past six months almost half (48%) of employers with hard-to-fill vacancies have increased wages to attract new hires and 46% of employers have advertised more jobs as flexible. Additionally, 84% of employers are planning a pay review in the 12 months to December 2022. Among these, around 40% expect basic pay to increase, 7% expect a pay freeze, while just 1% expect a decrease.
WORKFORCE RETENTION FOCUS
There is also a clear focus on workforce retention. Two-fifths of employers (41%) reported increased employee turnover or difficulty with retaining people over the last six months. To address this, almost half (46%) of employers with retention difficulties have raised the pay of the incumbent workforce in the last six months and 40% plan to raise pay in the future. Overall, employers report that the median basic pay increase in their organisation (excluding bonuses) in the 12 months to December 2022 will be 3%, the highest figure recorded in the last 10 years of the CIPD’s reporting.
Other popular responses to retention difficulties in the past six months include improved flexible working arrangements, implemented by almost half of employers (48%), focusing more on employee wellbeing (45%) and increased investment in training and development (36%).
RECORD PAY AWARDS
“Even though businesses anticipate making record pay awards to their employees this year, most people are set to see their real wages fall against the backdrop of high inflation,” commented Jonathan Boys, Labour Market Economist for the CIPD. “What is encouraging is that more employers are looking beyond pay increases to help attract and retain staff by providing more flexible working opportunities and investing in more training and development, as well as taking steps to support employee health and wellbeing. Together these practices can broaden the range of candidates employers can attract and may also reduce the need to recruit more staff, which should reduce wage inflation pressure to a degree.
However, the UK Government “must also address skills policy failings to support greater employer investment in workforce training”, added Boys. “In particular, there is a growing need to reform the Apprenticeship Levy into a more flexible training levy to help reverse the falling number of apprenticeships going to young people and enable employers to use the levy for other forms of more flexible and cost-effective training for existing employees.”
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This survey reiterates findings from another recent report, highlighting how the war for talent will trigger unprecedented employee rewards in a bid to attract and retain talent in 2022. Click here to read more.
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