Labour Market Outlook - CIPD · PDF file 2020-06-30 · Labour Market Outlook Winter...

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Transcript of Labour Market Outlook - CIPD · PDF file 2020-06-30 · Labour Market Outlook Winter...



    in partnership with

    Winter 2018–19

  • 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.

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    Labour Market Outlook Winter 2018–19

    Contents 1 Foreword from the CIPD 2

    2 Foreword from the Adecco Group UK and Ireland 2

    3 Executive summary 3

    4 Recruitment and redundancy outlook 4

    5 Job vacancies 7

    6 Pay outlook 10

    7 Focus on productivity 13

    8 Conclusion 20

    9 Survey method 20

    10 Endnotes 21


    Labour Market Outlook Winter 2018–19

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    Labour Market Outlook Winter 2018–19

    1 Foreword from the CIPD/2 Foreword from the Adecco Group UK and Ireland

    We’ve become used to the monthly labour market statistics setting records. Employment is at its highest rate (75.8%) since records began. Unemployment at 4% has not been lower since the 1970s, and with vacancies at an all-time high there are more job openings chasing fewer people. This shines through in this edition of the LMO, where employers are telling us that recruitment is challenging. An increasing proportion of vacancies are hard to fill and employers, especially in the private sector, are responding to recruitment difficulties by raising starting salaries.

    In this edition of the LMO we see the continuation of established trends and the possible beginnings of some new ones. The expected increase in private sector pay awards combined with the expected decrease in public sector pay awards could cause problems for public sector recruitment and retention if it becomes a trend. Over time the difference compounds, driving a wedge between public and private sector pay. This will be one to watch over the coming quarters.

    Employees will welcome the expectation in this LMO that basic pay awards will be above inflation, but this probably won’t become a trend long term. Inflation is expected to do much of the hard work here by falling. What is really needed for this to become a trend is productivity gains.

    This is the subject of our final section. Here we revisit questions that we asked HR leaders in 2014 to explore the link between high-performance working (HPW) practices and productivity. The role of these practices is increasingly recognised as an important tool in the pursuit of productivity growth.

    Jonathan Boys, Labour Market Economist, CIPD

    2 Foreword from the Adecco Group UK and Ireland

    The fact that this report is showing a third successive quarter of falling labour demand may seem, on the surface, like a cause for concern. However, context is important when considering this last edition of the CIPD/Adecco Group Labour Market Outlook report before the official Brexit date. This and the past three quarters represent high points for the survey, and before that, only one previous quarter (summer 2013) had scored higher than the current score of +20. So, demand still remains strong despite the inherent uncertainty of the months ahead.

    Keeping up with inflation might be the biggest reason for pay increases of 2% or more, but the demands of candidates in the market, along with retention pressures, are hot on its heels. Employers are increasingly finding it more expensive than they expect when they enter the recruitment market, and the Adecco Group does not expect that to change any time soon.

    1 Foreword from the CIPD

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    Labour Market Outlook Winter 2018–19Labour Market Outlook Winter 2018–19

    3 Executive summary

    The Adecco Group’s global CEO, Alain Dehaze, called talent ‘the deciding factor in the global scramble for prosperity’ in the recent Global Talent Competitiveness Index (GTCI) 2019 report. While this is true, organisations should remember that increasing wages is not the only option in this situation, especially during periods of uncertainty. Furthermore, it also might not be the most effective method.

    For highly skilled candidates – those who are hardest to acquire – incremental salary increases might not be all they are interested in. The right environment, colleagues and working practices may well be as valuable. In addition, in the current climate, some candidates might be more focused on stability, while others may be looking to take advantage of the uncertainty and the opportunities it presents.

    Employers should make sure they understand the type of candidate they think will succeed in their organisation before embarking on any recruitment activity. The GTCI talks about the difference between talent and traits. Firms can identify and recruit for certain traits, and then leverage the company infrastructure and environment to nurture their talent.

    Organisations should also ensure their talent process is streamlined. Candidates have many options these days, so when a good fit appears, employers don’t want to lose out to a faster-moving competitor.

    Alex Fleming, Country Head and President of Staffing and Solutions, the Adecco Group UK and Ireland

    3 Executive summary The quarterly CIPD Labour Market Outlook (LMO) provides a set of forward-looking labour market indicators, highlighting employers’ recruitment, redundancy and pay intentions for the first quarter of 2019. The survey is based on responses from 1,254 employers.

    Labour demand The net employment balance1 stood at +20 for Q4 2018. This continued a downward trend from Q1 2018, when it stood at +26. The balance is positive in all sectors but varies widely. It remains stable in healthcare (+32) and education (+2), while it has increased in public administration and defence (up from +4 points to +10), and manufacturing and production (up from +13 points to +18). Key indicators suggest increased pressure on recruitment. Seven in ten (71%) employers with vacancies report that at least some of these vacancies are proving hard to fill, which is up from 64% in the same quarter of last year.

    Wages After more than six years at 2%, the median expected basic pay increase in the private sector has risen to 2.5%, which is the highest registered since tracking began in 2012. At the same time, the expected basic pay increase in the public sector has fallen to just 1.1%, driving a wedge between the two sectors. The median expected basic pay increase for all sectors is 2%. With the Bank of England forecasting inflation to fall below 2% for much of 2019, 2 this will mean a real-terms pay rise for many in 2019. It must be noted that 43% of employers still say they cannot tell how they will change their pay.

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    Labour Market Outlook Winter 2018–19

    4 Recruitment and redundancy outlook

    Response to recruitment and retention pressures As is reflected in the pay settlement expectations, the private sector is much more willing to spend money to tackle recruitment and retention problems. Of those private sector employers with recruitment difficulties, 66% have increased starting salaries, up from 56% in the previous quarter. The same figure for the public sector is 27%, which is down from 29% in the previous quarter and 43% in summer 2018. Private sector employers with retention difficulties are much more likely to raise overall salaries (62%) than public sector employers (34%). Public sector employers are limited, as public sector pay restraint is cited as the top reason (for all employers) for expected average basic pay increases below 2%.

    Focus on productivity This quarter’s survey includes a focus on workplace productivity and the link to people management and development practices. It shows only half of all employers (50%) use the term productivity often when discussing performance, and 60% of employers have measurements for productivity. There are marked differences by industry. Some employers live and breathe productivity, finding it a useful concept in improving their day-to-day operations. In other industries, the term means little. For example, 78% of manufacturing employers use the term often, compared with just 18% of education employers and 16% for voluntary sector employers.

    There is a relationship between how prominent productivity is within an organisation and how likely they are to employ certain formal people management and development practices, also known as high-performance working (HPW) practices.

    4 Recruitment and redundancy outlook

    What is the short-term employment outlook? This section focuses on the recruitment and redundancy intentions of employers in the first quarter of 2019. This latest report suggests that employment confidence has remained broadly consistent with the previous quarter.

    This quarter’s net employment balance – which measures the difference between the proportion of employers who expect to increase staff levels and those who expect to decrease staff levels – stood at +20. It has been on a downward trend for the past three quarters and was at its highest in spring 2018, when it was +26 (Figure 1).

    How to interpret Figure 1 The red line represents the LMO net employment outlook, which indicates how employers feel employment levels will change over the next three months. The