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Counter-offers used to fill skills shortages

As skills shortages persist, 40% of UK employers have made a counter-offer to retain staff in the last 12 months according the CIPD's Labour Market Outlook.

Of these employers, 38% offered to match the salary of the new job offer and 40% offered more. 

Jon Boys, senior labour market economist for the CIPD, said employers should focus on the entire reward package when making counter-offers, rather than just pay.

He said: “While pay is often the most typical focus of a counter-offer, there are other things employers should consider in making roles more attractive, such as flexible working, additional paid holiday, opportunities for career development, or better pension contributions.”  

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Counter-offers are most prevalent in London, with 58% of London-based employers surveyed making a counter-offer in the last 12 months.

A quarter (25%) of employers expect to offer more counter-offers in the next 12 months vs the previous year, while only 8% expect to offer fewer.  

However, the research found only 22% of employers that make counter-offers have a formal policy on them, for example explaining in which circumstances they can be made. 

Boys warned that a lack of a formal process could result in issues relating to pay gaps and pay fairness. 

He said: “The fact that counter-offers are so widespread suggests they do have a role in matching people and jobs. Employers need to approach them with caution though and have clear internal processes for when these situations arise. 

“Counter-offers may help to retain key staff and avoid knowledge drains and the cost to hire new people, but this must be weighed up against other considerations.

"For instance, counter-offers could exacerbate pay gaps, cause equal pay challenges, or result in a drop in employee engagement. They may also only work for the short term.”

The research found 44% of employers have hard-to-fill vacancies, rising to half (50%) of public sector employers.

To address this, in the last six months, 44% of employees have raised wages and 35% have increased the duties of existing staff. 

However, some companies have struggled during the cost of living crisis, with big retail name Wilko going into administration last week with 12,000 jobs at risk.

The CIPD found 19% of employers are planning to make redundancies in the three months to September 2023. 

The news comes as a separate report found candidate availability is growing, while permanent placements have fallen at the fastest rate since June 2020, according to the Recruitment and Employment Confederation (REC) and KPMG.

Neil Carberry, REC chief executive, said although the job market is currently robust, it could worsen if there is no economic growth.

“Permanent hiring has been slowing all year. To some extent this is normalisation as the post-pandemic boom abates, but it is also driven by uncertainty. 

“This is seen in the scale of companies reshaping themselves while hiring in other areas. Recruiters report that the quickest rise in labour supply since the pandemic has been driven by an increase in redundancies.

“A proper industrial strategy that tackles the big issues we face and which fully encompasses workforce thinking around skills, transports, access to work and immigration is long overdue.”

The CIPD's Labour Market Outlook is a quarterly survey of 2,000 UK employers hiring, pay and redundancy intentions.