Posted by Robert Half on 15 May 2014
Job creation is continuing apace in the UK, as growth-focused businesses are actively hiring. In a fast-recovering economy, employers fully recognise the importance of rebuilding their teams and increasing their headcount, ensuring they have the resources needed to capitalise on commercial opportunities.
Latest figures from the Office for National Statistics (ONS) reveal that the number of people in employment in the UK rose to 30.43 million in the three months to March - the highest number since records began back in 1971. Unemployment fell by another 133,000 to 2.2 million - a new five-year low - as 283,000 more people found jobs during the first quarter of the year.
News of rising employment levels is undoubtedly positive, particularly after a protracted downturn which brought wide-ranging redundancies. An increase in vacancies means there are more opportunities for professionals to progress their careers, and for those who have been out of employment to rejoin the workforce.
But the positive labour market statistics mask an ongoing concern for employers - that there are insufficient numbers of skilled and experienced professionals to go around as they actively look to hire. As businesses are actively hiring as they target growth, demand for talent exceeds supply. This is particularly the case in niche areas with a small candidate pool.
The UK skills shortage helps explain a rise in average earnings over the last year - the ONS reported a 1.7% increase in the 12 months to March 2013. Salary inflation is symptomatic of a jobs market where employers are competing for talent, and paying a premium to recruit the best people. Organisations are being forced to offer higher wages to secure talent, and keep their most-valued employees out of the clutches of their rivals.
In this emerging 'war for talent', organisations which pay more than their rivals have a clear advantage. Salary may not be the only reason employees choose jobs, or opt to leave them, but it is typically an important factor in the decision-making process. So when competitors try to tempt professionals away with attractive pay and benefits packages, employers need to ensure they have a retention strategy in place to reduce employee turnover or watch their best people leave.
Skills shortages in niche areas
Employers are witnessing a skills shortage across a number of sectors and sub-sectors, as businesses are actively hiring. Accounting and finance is one area where demand for expertise currently exceeds supply, and salary inflation is being caused by insufficient numbers of qualified candidates according to the Robert Half Salary Guide.
With the market for experienced professionals tightening in recent months - reflecting greater employer demand - four in ten (42%) UK finance leaders say they will raise base salary levels and over a quarter (26%) intend to increase bonuses. Another 51% of those interviewed by Robert Half intend to maintain bonuses at their current level.
Finance leaders are expecting to increase base salaries by an average of 6.1% this year, around four times the current rate of inflation. This highlights just how determined they are to recruit the people they need to support growth, and ensure existing employees stay on-board for the long term.
Phil Sheridan, senior managing director for Robert Half UK, noted that businesses are now paying a premium to recruit and retain top professionals. "With organisations competing for a limited talent pool, finance professionals are in high demand, with many candidates receiving multiple offers," he explained.
Mr Sheridan said that, in order to retain business-critical staff, companies need to pay competitively and offer a host of other benefits - such as flexible working hours and extra holidays. "Businesses that are unsure about the different types of remuneration, benefits and/or salary bands, should look to industry salary guides as a benchmark," he urged.