Recruitment pressures rise as EU migration drops

The latest CIPD Labour Market Outlook shows the short-term outlook for employment is strong but skills shortages are a concern

The net employment balance – a measure of the difference between the proportion of employers who expect to increase staff levels and those who expect to decrease staff levels – has fallen slightly to +23 from +26 in the third quarter of 2018. Employment growth looks set to be particularly strong among business services (+37), transport (+38) and construction (+38).

However, strong demand for labour is finally increasing recruitment pressures for employers. This is because the labour supply is failing to keep pace with labour demand, exacerbated by a ‘supply shock’ of far fewer nationals from the European Union (EU) coming into the UK, the CIPD warned.

Employers received a median of 20 applicants for the last low-skilled vacancy they tried to fill, compared with 24 candidates in Summer 2017 and 25 candidates in Autumn 2015. They received a median of 10 applicants for the last medium-skilled vacancy they tried to fill, compared to 19 applicants in Summer 2017 and 15 applicants in Autumn 2015.

Among employers who currently have vacancies, two-thirds (66%) reported that at least some of their vacancies are proving hard to fill, higher than in Spring 2018 (61%) and Spring 2017 (56%). Organisations with hard to fill vacancies reported that the density of these is higher now (40%) in their organisation compared with three months ago (30%) .

Two in five employers (40%) report that it has become more difficult to fill vacancies over the past 12 months, owing to a combination of fewer applicants and less suitable applicants in broadly equal measure.

The report found that 53% of organisations that have experienced increased difficulty recruiting staff during the past 12 months have increased starting salaries in response, with 24% having done so for the majority of vacancies, and a further 28% for a minority of vacancies.

However, while demand for labour is continuing, median basic pay expectations in the 12 months to June 2019 remain at just 2%.

When asked about retention challenges, 55% of organisations that have experienced increased difficulty retaining staff over the past 12 months reported having increased salaries, with 30% raising salaries for the majority of staff and 25% doing so for key staff only. Forty-two per cent have not raised salaries at all in response to rising retention difficulties, highlighting the wider productivity challenges and cost pressures many face.

Gerwyn Davies, senior labour market analyst for the CIPD, called for government assurances regarding access to EU talent.

“The most recent official data shows that there has been a significant slowdown in the number of EU nationals coming to work in the UK over the past year. This is feeding into increasing recruitment and retention challenges; particularly for employers in sectors that have historically relied on non-UK labour to fill roles, and which are particularly vulnerable to the prospect of future changes to immigration policy for EU migrants,” he said.

“With skills and labour shortages set to worsen further against the backdrop of rising talk of a ‘no deal’ outcome with the EU, the need for the government to issue consistent categorical assurances about the status of current and future EU citizens, whatever the outcome of the negotiations, is more important than ever.”

Alex Fleming, country head and president of staffing and solutions at The Adecco Group UK and Ireland, added that as Brexit approaches employers should concentrate on employee benefits to aid staff retention.

With Brexit looming we’re seeing a talent shortage and a more competitive marketplace," she said. "In this candidate-short landscape the pressure is on employers to not only offer an attractive salary, but also additional benefits. In today’s environment, employment benefits such as healthcare, a strong pension, flexible working and a collaborative and empowering work culture give employers a strong competitive advantage in attracting the best talent.

“Retention also remains key; it is imperative that employers develop and promote their staff so they don’t fall short and feel the impact of the dwindling growth of the UK’s talent pool," she added. "The recent falling net migration ONS figures for EU nationals arriving in the UK with no job offer is just another clear indication that it is time for employers to recognise their shortcomings in attracting new staff, and in retaining their current talent.”