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OUTLOOKVIEWS FROM EMPLOYERS
LABOURMARKET
Spring 2019
The CIPD is the professional body for HR and people development. The not-for-profit organisation champions better work and working lives and has been setting the benchmark for excellence in people and organisation development for more than 100 years. It has 150,000 members across the world, provides thought leadership through independent research on the world of work, and offers professional training and accreditation for those working in HR and learning and development.
1
Labour Market Outlook Spring 2019
Contents 1 Foreword from the Adecco Group UK and Ireland 2
2 Executive summary 3
3 Recruitment and redundancy outlook 4
4 Job vacancies 7
5 Pay outlook 12
6 Survey method 15
Report
Labour Market Outlook Spring 2019
2
Labour Market Outlook Spring 2019
1 Foreword from the Adecco Group UK and Ireland
The Adecco Group has highlighted a skills-short market for some time. It is typically a difficult thing to quantify, but this latest Labour Market Outlook shines a strong light on the areas that businesses are struggling in.
It might be expected that businesses would struggle most with hiring senior candidates, those with the rarest, most valuable of skill sets, but the report shows that’s not the case. In fact, more businesses are struggling to acquire quality entry-level talent than senior executives.
UK businesses seem to be most struggling with acquiring quality, experienced professionals with technical skills. This makes sense as these are the skills it’s hardest to do without – you can’t be a lawyer without knowledge of the law.
The most common response from the survey to tackling these recruitment challenges was upskilling existing employees; but conversations about upskilling should also be part of the recruitment process.
Candidates increasingly understand that it is their responsibility to mould their own careers, set their own goals and build their own skill sets to achieve upskilling. In the Adecco Group’s recent Future-Proofing the Workforce report, 62% of respondents said that they were most responsible for the acquisition of new skills compared to just 22% who said employers were.
Successful internal training and promotion schemes can be highly valuable tools for attracting talent at all levels of business. Digital platforms, such as Glassdoor and LinkedIn, allow employees to advocate for the positive things companies do that used to be hidden behind closed doors.
UK employers should take advantage of this drive and interest in upskilling by creating internal pipelines of talent.
Increasing the salary package on offer to fill a job quickly is a perfectly acceptable short-term fix to skills shortages, but successful businesses need long-term solutions to flourish.
Alex Fleming, Country Head and President of Staffing and Solutions, the Adecco Group UK and Ireland
1 Foreword from the Adecco Group UK and Ireland
3
Labour Market Outlook Spring 2019Labour Market Outlook Spring 2019
2 Executive summaryThe quarterly CIPD Labour Market Outlook (LMO) provides a set of forward-looking labour market indicators, highlighting employers’ recruitment, redundancy and pay intentions. The survey is based on responses from 2,182 employers.
Labour demandAccording to the survey data in this report, the recent strong growth in employment looks set to continue in the short term. The net employment balance1 for Q2 2019 is +22, which is broadly consistent with previous quarters. Across industries, employment growth expectations are broad-based but are highest in business services (+38), construction (+36), healthcare (+31) and ICT (31%). Buoyant demand continues to cause recruitment and retention difficulties for many employers. Around two-fifths (41%) of employers say that it has become more difficult to fill vacancies during the past year. Meanwhile, around a third (33%) of employers say that it has become harder to retain staff.
Upskilling remains at the forefront of employers’ responses to such difficulties. More than two in five (43%) employers say that they are upskilling existing employees to fill hard-to-recruit-for positions. Other popular responses to attract staff include improving the pay and benefits package and hiring more apprentices.
The latest official data from the Office for National Statistics (ONS) also suggests that employers are looking to broaden their approach to recruiting staff in light of a tightening labour market. It shows that employers have hired a relatively large proportion of older workers, women returners and people with disabilities during the past year. This is fairly consistent with the survey data in this report, which suggests that a small proportion are hiring more older workers and more people from disadvantaged groups and lowering recruitment standards in response to such difficulties (Figure 9).
Another feature about the composition of employment growth during the past year is that the vast majority of the additional jobs have been skilled, full-time and permanent, which could mean that employers are needing to offer more secure employment opportunities to attract staff as the competition for workers continues to grow.
Wages and salariesDespite rising recruitment and retention pressures, median basic pay expectations in the 12 months to March 2020 remain at 2%, which is consistent with recent LMO reports. However, expectations have fallen back in the private sector from 2.5% to 2% since the previous report. At the same time, basic pay expectations have risen in the public sector from 1% to 1.5%.
The LMO pay indicator has diverged somewhat from the latest official average weekly earnings (AWE) measure, which shows that earnings (excluding bonuses) have increased by 3.4% over the past year. This can be partly explained by the limitation of basic pay settlements to capture the extent to which employers are offering higher pay to some key or new staff. As the survey data in this report indicates, of those employers reporting recruitment difficulties, over half of establishments have increased starting salaries. Yet, employers are almost as likely to say that they have raised salaries for the minority of vacancies only as they are to report a more generous offering for the majority of workers.
2 Executive summary
1 The net employment balance is an indicator of employment confidence. It takes the difference between the proportion of employers who expect to increase staff levels and those who expect to decrease staff levels.
4
Labour Market Outlook Spring 2019
3 Recruitment and redundancy outlook
Employers report a very similar approach to reward in terms of retaining staff, which means that while some workers may be benefiting from a pay dividend as a result of the tightening job market, many will not.
Another factor behind rising average earnings is the composition of employment growth during the past year, which has been drawn from medium-skilled or high-skilled occupations according to official statistics.2
The results thus suggest that the recent strengthening in pay growth looks set to stall, unless the UK’s productivity growth begins to strengthen appreciably.
3 Recruitment and redundancy outlook
What is the short-term employment outlook?This section focuses on the recruitment and redundancy intentions of LMO employers in the second quarter of 2019. This latest report suggests that employment confidence remains high compared with the measure’s historical average (Figure 1). This quarter’s net employment balance has increased from +20 to +22 (Figure 1).
How to interpret Figure 1The red line represents the LMO net employment outlook, which indicates how employers feel employment levels will change over the next three months. The purple line represents the ONS quarterly change in employees to show what actually happened to the number of employees in the labour market.
Base: Spring 2019, all employers (n=2,182).
–2.9
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% c
hang
e in
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of e
mpl
oyee
s on
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arte
r
LMO
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em
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men
t ba
lanc
e
Jan–
Mar 20
14
Apr–Jun
2014
Jul–S
ep 20
14
Oct–Dec
2014
Jan–
Mar 20
15
Figure 1: Relationship between quarterly increase in number of employees (Labour Force Survey) and Labour Market Outlook net employment balance projection
Apr–Jun
2015
Jul–S
ep 20
15
Oct–Dec
2015
Jan–
Mar 20
16
Apr–Jun
2016
Jul–S
ep 20
16
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2016
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ep 20
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2017
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2018
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ep 20
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2018
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Mar 20
19
April–Ju
n 2019
% change in number of employees on previous quarter (left axis)
%
LMO net employment balance (right axis)
18
16 16 16 16 16
26
23 22 22
30
25
2020
15
10
5
0
15 14
21 20 20
19
1918 18
17
2 www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/uklabourmarket/latest
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Labour Market Outlook Spring 2019Labour Market Outlook Spring 2019
3 Recruitment and redundancy outlook
Figure 2: Decomposition of net employment balance over time
Dec
ompo
sitio
n of
net
em
ploy
men
t ba
lanc
e (s
tack
ed b
ars)
Net
em
ploy
men
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e (g
rey
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2014
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16 1719
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1516 14
18 18
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26
2322
20
22
Base: Spring 2019, all employers (n=2,182).
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50
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Don’t know
Increase total sta� level Maintain total sta� level
Quarter
Decrease total sta� level
Net employment score
The results suggest that any employment growth will continue to be driven by the private sector, which has increased from +22 to +25 since the previous quarter. In addition, employment levels look set to increase in the public sector (+8) and in the voluntary sector (+26) during the same period (Figure 3).
Base: Spring 2019, all employers (total n=2,182; private n=1,659; public n=328; voluntary n=195).
–25
–20
–10
–15
–5
15
20
0
Net
em
ploy
men
t ba
lanc
e
5
10
25
30
35
Figure 3: Overall e�ect of increasing or decreasing sta� over the next three months, by business sector
PublicVoluntary
25
26
22
8
Summer
2014
Sprin
g 2014
Autum
n 2014
Wint
er 20
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g 2015
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2015
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er 20
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er 20
18–19
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g 2019
TotalPrivate
Quarter
6
Labour Market Outlook Spring 2019
3 Recruitment and redundancy outlook
Employment confidence appears to be fairly broad-based across sectors (Figure 4). Among the LMO employers who responded to the survey, employment confidence is highest in business services (+39), construction (+36), healthcare (+31) and ICT (31%).
Figure 4: Net employment score, by sector (%)
Base: All bases > 50. For breakdown of base sizes see Table 3. Net employment score
0
11
11
16
20
20
26
28
31
31
36
39
22
23
24
Education
Public administration and other public sector
Primary and utilities
Manufacturing
Wholesale, retail and real estate
Hotels, catering and restaurants/arts, entertainment and recreation
Total
Transport and storage
Finance and insurance
Business services (for example consultancy, law,PR, marketing, scientific and technical services)
Construction
Information and communication
Healthcare
Administrative and support serviceactivities and other service activities
Voluntary
Looking across the different nations and regions of the UK (Figure 5), employment confidence is highest in Yorkshire and Humberside (+27) and the north-west of England (+26) and lowest in the East Midlands (+13) and the north-east of England (+8).
Figure 5: Net employment score, by region (%)
Base: All bases > 50. For breakdown of base sizes see Table 3.
26
23
27
22
22
19
13
8
19
17
16
Yorkshire and Humberside
North-west of England
South-east of England
Eastern England
Wales
South-west of England
London
Scotland
West Midlands
East Midlands
North-east of England
Net employment score
7
Labour Market Outlook Spring 2019Labour Market Outlook Spring 2019
4 Job vacancies
4 Job vacanciesAgainst the backdrop of a buoyant demand for labour, it is no surprise that a majority of organisations who are currently hiring have hard-to-fill vacancies. Among employers who currently have vacancies in their organisation, three in five (61%) report that at least some of these vacancies are proving hard to fill. By comparison, the same proportion (61%) of employers reported that they were currently having difficulty filling vacancies in their organisation during the same period in 2018 (Figure 6). Additionally, more than two fifths (41%) of employers report that it has become more difficult to fill vacancies over the past year. Around one in twenty organisations (6%) say that it has become less difficult.
Autumn2017
Winter2017–18
Spring2018
Summer2018
Autumn2018
Winter2018–19
Spring2019
63
65
67
61
59
57
55
69
71
73
Figure 6: Proportion of organisations with current vacancies that have hard-to-fill vacancies (%)
Quarter
7170
61
66
61
6464
Prop
ortio
n of
LM
O e
mpl
oyer
s (w
ith v
acan
cies
)th
at c
urre
ntly
hav
e ha
rd-t
o-fil
l vac
anci
es
Base: Spring 2019, all employers who currently have vacancies (n=1,237).
Hard-to-fill vacancies are most prevalent in public administration and defence (74%) and healthcare (73%) and ICT (69%) (Figure 7). Looking at the broader sectors, recruitment difficulties are higher in the public sector (72%) than in the private sector (59%) and voluntary sector (49%).
8
Labour Market Outlook Spring 2019
4 Job vacancies
Figure 7: Proportion of organisations with current vacancies that have hard-to-fill vacancies (%)
Base: All bases > 50. For breakdown of base sizes see Table 3.
Proportion of LMO employers (with vacancies) that currently have hard-to-fill vacancies
73
69
74
69
65
65
63
61
61
57
49
49
47
64
64
63
Healthcare
Public administration and other public sector
Information and communication
Construction
Manufacturing and construction
Hotels, catering and restaurants/arts, entertainment and recreation
Manufacturing
Primary and utilities
Education
Business services (for example consultancy, law,PR, marketing, scientific and technical services)
Transport and storage
Voluntary
Wholesale, retail and real estate
Administrative and support serviceactivities and other service activities
Finance and insurance
Total
Do you currently have any vacancies that are hard to fill?
What proportion of vacancies are hard-to-fill?On average, organisations with hard-to-fill vacancies report that nearly four in ten of their total vacancies (39%) are proving hard to fill. This is higher than the incidence of recruitment difficulties reported in the spring 2018 survey, where three in ten of all vacancies (30%) were hard to fill among those organisations that experienced recruitment difficulties.
Overall, employers whose organisations are facing hard-to-fill vacancies report that on average around two-thirds (64%) are skill shortage vacancies – vacancies which are proving difficult to fill because of the establishment not being able to find applicants with the appropriate skills, qualifications or experience.
By occupation, the incidence of skill shortage vacancies among employers is particularly prevalent among professional occupations (for example scientists, engineers, IT business analysts, and so on), where half (50%) of employers say that applicants do not have the required level of skills, qualifications or experience. Meanwhile, around three in ten establishments (28%) say they are having difficulty filling positions for associate professional and technical occupations (for example science/engineering technicians, architectural technicians, and so on).
9
Labour Market Outlook Spring 2019Labour Market Outlook Spring 2019
4 Job vacancies
In addition, almost a quarter (23%) of employers report challenges recruiting managers, directors and senior officials and a similar proportion report similar difficulties for filling skilled trades vacancies (20%). Meanwhile, fewer employers report difficulties finding staff for administrative and secretarial (7%), process, plant and machine (7%) or elementary (5%) occupations. This is perhaps no surprise given that all of the employment growth during the past year has come from medium-skilled or high-skilled roles.3
% o
f LM
O e
mpl
oyer
s
40
50
60
30
20
10
0
Figure 8: Most di�cult positions to fill (%)
16
4
2731
19
49
Base: All organisations with hard-to-fill vacancies (n=757).
Level of seniority – low to high
Entry
level
(for e
xample
first
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e/grad
uate
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g under
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ision
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ence
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ing ex
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emic
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r pro
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ualifi
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Middle-lev
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agem
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xample
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l man
agers
,
region
al man
ager,
plant m
anag
er)
Senio
r, exe
cutiv
e, or
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vel
manag
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t or c
hief e
xecu
tives
Don’t k
now
First-
level
manag
emen
t
(for e
xample
superv
isors,
team
lead
ers,
depart
ment m
anag
er)
In terms of levels of seniority, employers with hard-to-fill vacancies indicate that intermediate or experienced level roles are proving most difficult to fill (49%), followed by middle-level management (31%) and first-level management (27%) roles (Figure 8). Employers seem to be having less difficulty finding candidates with the necessary skills or experience for senior, executive, or top-level management (16%) or entry-level (19%) roles.
Organisational response to hard-to-fill vacanciesThe vast majority of organisations are currently taking steps to tackle recruitment difficulties (Figure 9). Upskilling remains at the forefront of organisations’ approaches to tackling recruitment difficulties. More than two in five (43%) employers are currently upskilling existing staff to help offset hard-to-fill vacancies. Meanwhile, almost three in ten (29%) employers are currently raising wages, while almost a quarter (23%) of employers report that they are hiring more apprentices. In addition, almost a fifth (19%) of establishments are hiring from overseas to offset their current difficulties.
3 www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/uklabourmarket/latest
10
Labour Market Outlook Spring 2019
4 Job vacancies
The findings also suggest that a relatively small proportion of employers have changed their recruitment practice in response to a tightening labour market. For instance, the most recent official data suggest that more than 70% of the employment growth during the past year has come from workers aged 50 and above. This survey suggests that almost one in ten (8%) employers say they are taking on more older workers while a similar proportion (6%) say that they are targeting individuals from disadvantaged groups. Overall, around one in seven (16%) employers say that they are lowering their recruitment standards.
Figure 9: Organisation response to hard-to-fill vacancies (%)
Base: Organisations with hard-to-fill vacancies (n=757).
29
23
43
19
18
17
12
11
10
8
8
6
5
16
13
13
Improving the pay and benefits package
Upskilling existing employees to fill hard-to-recruit-for positions
Hiring more apprentices
Recruiting candidates from overseas
More investment in the brand of the organisationto attract a wider or younger set of applicants
Employing more self-employed people to fill thegap (for example freelancers and consultants)
Lowering recruitment standards (for example recruitingcandidates that don’t have the desired experience or skill level)
Hiring more UK graduates
Greater investment in labour-saving technology
Not applicable – my organisationis not undertaking any of these things
O�shoring activities
Greater e�orts to recruit from disadvantaged groups (for examplepeople with a criminal record, long-term unemployed, etc)
Other
Greater e�orts to recruit workers aged over 55
Outsourcing activities
More work experience schemes/work placements/internships
% of LMO employers
Res
pons
e to
har
d-to
-fill
vaca
ncie
s
To alleviate their recruitment difficulties, more than half of employers (53%) have increased starting salaries for at least a minority of vacancies. Over a quarter of organisations (28%) have increased salaries for the majority of vacancies in response to recruitment pressures, while a similar proportion (25%) say that they have increased wages for a minority of vacancies only. However, more than four in ten (43%) employers have still not made any increases in starting salaries. In the private sector, the proportion of employers raising starting salaries has fallen from 66% to 62% during the past three months. Meanwhile, the proportion of public sector employers that have raised starting salaries in response to recruitment difficulties continues to decline (Figure 10). A quarter of employers (25%) say that they have raised starting salaries in response to recruitment difficulties, which is down from 43% in summer 2018.
11
Labour Market Outlook Spring 2019Labour Market Outlook Spring 2019
4 Job vacancies
Summer2018
Autumn2018
Winter2018–19
Spring2018
40
45
50
35
30
25
20
15
10
5
0
55
65
60
70
Figure 10: Proportion of employers raising starting salaries in response to recruitment di�culties (%)
Base: Recruitment has become more di�cult (raise starting salaries) (public n=159; private n=593).
56 56
66
62
29
43
2725
Private (increased starting salaries) Public (increased starting salaries)
How are retention pressures changing? A third of employers (33%) assert that it has become more difficult to retain staff at their organisation over the past 12 months, which is broadly consistent with previous reports. Employers in the public sector are significantly more likely than those in the private sector to report it has become more difficult to retain staff (42% compared with 32%) during the past 12 months.
Among organisations that have had increasing difficulty retaining staff over the past 12 months, over half (54%) have increased salaries in some capacity. However, almost as many employers say that they have increased salaries for key staff at the organisation (25%) as the proportion that say they have raised salaries for the majority of staff (29%) to improve retention rates.
Employers in the public sector are significantly less likely to have increased salaries than those in the private sector (33% compared with 60%) (Figure 11).
12
Labour Market Outlook Spring 2019
5 Pay outlook
Summer2018
Autumn2018
Winter2018–19
Spring2018
40
45
50
35
30
25
20
55
65
60
70
15
10
5
0
Figure 11: Proportion of employers raising salaries in response to retention diculties (%)
Base: Retention has become more di�cult (raise salaries) (public n=129; private n=467).
6159
6260
32
3534 33
Private (all salaries) Public (all salaries)
5 Pay outlookWhat is likely to happen to wages in the next 12 months?Median basic pay expectations in the 12 months to March 2020 are 2%, which is consistent with recent LMO reports. However, expectations have fallen back in the private sector from 2.5% to 2% since the previous report. At the same time, basic pay expectations have risen in the public sector from 1% to 1.5% (Figure 12). Looking at the sub-sectors, median basic pay award expectations are higher in the manufacturing sector (2.4%) than in the services sector (2%).
Despite the modest fall in the share of organisations that are unable to predict their next basic pay awards, around three in ten (29%) of organisations still do not know what their next basic pay award will be, so some care should be taken not to make too much of this.
13
Labour Market Outlook Spring 2019Labour Market Outlook Spring 2019
5 Pay outlook
Base: Spring 2019, all employers who report an expected increase, decrease or pay freeze in the next 12 months(total n=992; private n=703; public n=181; voluntary n=108).
Figure 12: Average predicted annual basic pay awards (median), by business sector
Sprin
g 12
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O e
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10
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Figure 13: Distribution of forward-looking basic pay settlements – spring 2019 (%)
0 00 01
12
18
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38
18
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eeze
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99
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.994.0+
Base: Spring 2019, all employers who report an expected increase, decrease or pay freeze in the next 12 months (total n=992).
Bands of pay change
14
Labour Market Outlook Spring 2019
What are the key factors behind employers’ basic pay decisions? According to the survey data, inflation continues to put upward pressure on pay for some organisations. The proportion of employers that cite inflation as a reason for a basic pay award of 2% or more remains elevated (42%) compared with three months ago (44%) (see Figure 14). Meanwhile, the proportion of organisations that say that the going rate of pay elsewhere has been an influence fell from just four in ten (38%) employers to 32% of employers.
In addition, the proportion of organisations that cite recruitment and retention pressures has fallen from around one in three employers (34%) to almost three in ten employers (29%).
Among employers who predict that average basic pay will increase at their organisation by less than 2%, or not increase at all, the three most popular reasons are restraint on public sector pay (35%), affordability (35%) and uncertainty around the UK’s future access to the EU market (21%).
5 Pay outlook
Rea
sons
beh
ind
incr
ease
abo
ve 2
%
Figure 14: Top causes for increase in average basic pay by 2% or more (%)
44
32
29
26
19
14
11
7
1
Base: Spring 2019, all employers who expect their organisation’s basic pay will increase by 2% or more (n=687).
Inflation
Movement in market rates/the ‘going rate’ of pay rises elsewhere
Other labour costs, for example, the NationalLiving Wage, the apprenticeship levy,
auto-enrolment pension scheme
Recruitment and retention issues
Organisation’s ability to pay more
The ‘ripple e�ect’ of higher starting salaries
Union/sta� pressures
Other
Don’t know
% of LMO employers
Rea
sons
beh
ind
incr
ease
bel
ow 2
%
Figure 15: Top factors restricting organisations’ ability to match the inflation rate target of 2% (%)
35
35
21
18
15
8
7
7
1
Base: Spring 2019, all employers who expect their organisation’s basic pay will increase by less than 2% (n=304).
Restraint on public sector pay
Organisation’s inability to pay more
Uncertainty about future access to the EU market
To absorb labour costs, for example auto-enrolmentpension scheme, the National Living Wage,
apprenticeship levy, etcMovement in market rates/
the ‘going rate’ of pay rises elsewhere
Poor employee productivity and performance
We have no recruitment and retention issues
Other
Don’t know
% of LMO employers
15
Labour Market Outlook Spring 2019Labour Market Outlook Spring 2019
6 Survey methodAll figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2,182 senior HR professionals and decision-makers in the UK. Fieldwork was undertaken between 21 March and 18 April 2019. The survey was carried out online. The figures have been weighted and are representative of UK business by size, sector and industry.
Weighting Rim weighting is applied using targets on size and sector drawn from the Business Population Estimates for the UK and Regions 2016. The following tables contain unweighted counts.
6 Survey method
Table 3: Breakdown of sample, by industry
Industry Count
Voluntary 195
Manufacturing and production 371
Manufacturing 192
Construction 129
Primary and utilities 50
Education 209
Healthcare 145
Private sector services 1,127
Wholesale, retail and real estate 143
Transport and storage 58
Information and communication 134
Finance and insurance 175
Business services (eg consultancy, law, PR, marketing, scientific and technical services) 257
Hotels, catering and restaurants/Arts, entertainment and recreation 152
Administrative and support service activities and other service activities 208
Public administration and defence 135
Public administration and other public sector 120
Police and armed forces 15
Total 2,182
Table 1: Breakdown of the sample, by number of employees in organisation
Employer size band Count
2–9 449
10–49 485
50–99 181
100–249 229
250–499 170
500–999 123
1,000 or more 545
Total 2,182
Table 2: Breakdown of sample, by sector
Sector Count
Private sector 1,659
Public sector 328
Third/voluntary sector 195
Total 2,182
16
Labour Market Outlook Spring 2019
6 Survey method
Table 4: Breakdown of sample, by region
Region Count
North-east of England 63
East Midlands 114
West Midlands 149
Scotland 140
London 365
South-west of England 154
Eastern England 105
Wales 62
South-east of England 304
North-west of England 167
Yorkshire and Humberside 134
Northern Ireland 18
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Issued: May 2019 Reference: 7864 © CIPD 2019