Substantial pay increases ‘unlikely’ in the next 12 months, CIPD finds

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Substantial wage rises are unlikely over the next 12 months as the majority of employers report they are having little problem hiring the staff they need, according to the latest CIPD Labour Market Outlook (LMO) survey.

The survey, with more than 1,000 employers, revealed that only 15 per cent of job vacancies are proving difficult to fill, meaning firms will not be forced to boost pay to attract recruits.

There are exceptions to this, with sectors such as construction and utilities, finance and retail still struggling to fill roles due to skills shortages, but overall median basic pay is predicted to rise by just 2 per cent in the year to September 2016.

LMO results showed that the number of applicants per vacancy has remained steady during the past year. Employers say they receive an average of 25 applications for each low-skilled role, 15 for medium-skilled roles and eight for highly-skilled roles.

This suggests that most businesses are seeing a steady flow of suitable candidates, despite unemployment falling to a seven-year low in October and despite a slight year on year increase (from 44 per cent to 49 per cent) in the proportion of employers with hard to fill vacancies. The majority of employers said they respond to the problem of difficult to fill roles by up-skilling existing staff (48 per cent), followed by hiring more apprentices (27 per cent), recruiting migrant workers (23 per cent) and raising starting salaries for hard to fill positions (22 per cent).

Gerwyn Davies, labour market analyst at the CIPD, said: ”It seems that armageddon warnings about the UK facing a skills shortage crisis understate the ability of many employers to ease their recruitment problems. Many employers have heeded previous warnings of a tightening jobs market by providing more job opportunities for young people, including through apprenticeships, while up-skilling the existing workforce. At the same time, others are using migrant workers to strengthen their defence against a tightening labour market.”

He said that this “flexibility in the UK labour market” was likely to restrain any significant wage inflation over the next 12 months. “This is despite the introduction of the national living wage in April 2016, which may have a big impact on overall wage bills for some organisations in certain sectors, but negligible impact on overall wage inflation,” Davies added.

Skills shortages are still an issue for certain recruiters with the largest proportion of hard-to-fill vacancies in the manufacturing and production sector (24 per cent), which includes industries such as construction and utilities, and private sector services (24 per cent), which covers industries such as finance and retail.

Davies added: “In some areas though, skills shortages do remain more acute. Employers that are struggling to fill vacancies should think creatively about how they can upskill the workforce. On-the-job learning, mentoring schemes and apprenticeships are cost effective ways in which both new blood and new skills can be injected into the workforce.”

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