· 2 min read · News

War for talent creates wage pressures for employers


There are signs that wage pressures may be increasing for employers, the CIPD has warned

The latest Labour Market Outlook from the CIPD and Adecco Group found that there will be strong growth in demand for labour in the second quarter of 2018.

During the past three months 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 in the second quarter of 2018 – increased from +16 to +26.

Employers could have been reassured by recent announcements that the UK’s existing trading arrangements and freedom of movement will continue during the Brexit transition and that EU nationals who arrive during that time can stay in the UK indefinitely, the report suggested.

However, while employment growth intentions are strong, the number of vacancies in the UK economy remains well above historic average levels, the report highlighted. This means employer demand for skills and labour may not be met, the CIPD warned, with increased pressure on employers to offer higher wages.

Gerwyn Davies, senior labour market analyst for the CIPD, encouraged employers to “think creatively” about ways to attract talent.

“Employers looking to expand their workforces are likely to face growing headwinds as organisations find it more difficult to source the people and skills they need," he said. "This may explain why wage pressures are starting to increase following a prolonged period of relatively subdued pay growth. It could well be that employers are using higher starting salaries to attract the talent they need."

Davies advised that: "There needs to be a mix of attracting new and diverse talent as well as upskilling existing staff.

"In particular, organisations must put much more effort into attracting and retaining older workers, women returning to work after having children, and other disadvantaged groups in the labour market, as well as investing in training and developing their existing workers,” he said.

Alex Fleming, country head of UK and Ireland and president of staffing and solutions at Adecco Group UK and Ireland, urged employers to take advantage of the fact that pay is no longer the priority for many prospective employees.

"Employers have more than one weapon in their arsenal; elements such as flexible working, modern workspaces, collaborative office spaces and inspiring management are all attractive to different segments of the labour market,” she said.

“It is time for employers to recognise talent as individuals and tailor employment packages accordingly to avoid missing out on key skills that will drive innovation and success.”

The CIPD’s Labour Market Outlook is based on the responses of 1,008 HR professionals and senior decision-makers.