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Wage growth remains restrained
Recruitment prospects are picking up across the private sector, particularly for professional and highly-skilled staff, but there is little wage growth in the economy as pay restraint remains the norm. That is according to a survey by the CBI and recruitment specialists Harvey Nash out today (Tuesday 21 June, 2011).

Navigating Choppy Waters, the CBI/Harvey Nash Employment Trends Survey, covers 335 UK employers, which together employ nearly three and half million people. The survey shows that the private sector is seeing job prospects pick up as the economy strengthens, while the public sector is scaling back recruitment as the Governments austerity measures start to bite.

Across the economy, the survey shows that 29% of employers plan to increase permanent recruitment in the next six months either across or in parts of the their organisations.

With the public sector now taking steps to cut costs, the number of recruitment and pay freezes across the economy has risen: recruitment freezes rose slightly to 9% while pay freezes are up from 14% in October to 23%. In the private sector, the proportion of pay freezes remained unchanged at 16%, while in the public sector 83% of organisations are operating pay freezes.

John Cridland, CBI Director-General, said:
The pay and recruitment freezes that were commonplace in the private sector during the depths of the recession have now migrated to the public sector. However, we remain confident that private sector growth can more than compensate for job losses in the public sector.

With the recovery in its early stages and inflationary pressures a worry, employers are having to take tough decisions on pay. Only a quarter of employers can afford to make an award in line with inflation. Most are trying to strike a fair balance by offering either modest awards or targeting pay rises on essential staff. As a result, we are seeing very little in the way of wage inflation in the economy.

Looking at the surveys findings on recruitment and pay in more detail:
29% of all employers plan to increase permanent recruitment in the next six months either across or in parts of their organisations, while a quarter (26%) expect no change to their level of recruitment
Openings for temporary staff are increasing modestly with a balance of 7% of firms anticipating recruitment compared to those expecting a reduction
Job prospects are slowly improving for graduates, with the overall balance between firms expecting higher and lower graduate recruitment at 9%
With pay restraint the norm, 31% of firms are planning a general increase below RPI 17% are planning targeted increases for some staff only 20% are planning a general increase in line with RPI and 4% an above-inflation award
57% of employers say unrealistic expectations for reward packages could be a barrier to hiring employees from the public sector.

Albert Ellis, CEO of Harvey Nash, commented:
While the public sector is reigning in recruitment plans, private sector employment is growing slowly but steadily.

People with higher level skills, professional, technical and sales experience are most in demand, as these are critical roles for firms seeking to capitalise on growth opportunities.

The big challenge for the Government will be ensuring that public sector workers have the right skills and commercial attitude to move with ease to other roles in the private sector.

The manufacturing sector has been enjoying particularly strong growth, and is a recruitment hotspot, as is the whole area of smart phone software application development. This is reflected in the fact that a third of employers in manufacturing are planning more generous pay rises. The outlook for graduate recruitment is also brightening, though competition for jobs remains very high.

On the UKs attractiveness as a place to do businesses, the survey found that nearly two-thirds of employers (61%) believe the UK has become a less attractive place to invest and do business over the last five years, but are hopeful that things will improve.

77% of all employers say the burden of employment regulation is their biggest concern, but are hopeful the Government will address this
54% see the UKs low skills base as a threat to competiveness, with little improvement in prospect
Employers are growing increasingly concerned about their ability to bring in talent from outside the EU, particularly those with specific technical or higher-level skills. This is currently cited by 13% of employers but expected to rise to 26% in five years time.

Mr Cridland commented:
Most employees negotiate on a one-to-one basis with their employers and the increasingly bureaucratic nature of employment regulation is at odds with this.
Companies tell us that this is getting in the way of open and honest dialogue, entrenching an old-fashioned view of the workplace based on them and us.
The Government has made a good start reforming the tribunals system and introducing the notion of one-in-one-out on regulation, but now we need to see that translated into action to make the UK the best place to invest.

On flexible working, the survey found that nearly all employers (96%) offer at least one form of this, and 70% offer three or more types. This includes part-time working, flexi- and term-time working, as well as job sharing. Firms cite a range of positive spin-offs from improved employee relations (74%), boosting recruitment and retention (61%), improved productivity (37%) and lower absence rates (38%). Despite the majority of firms being very positive about current flexible working arrangements, employers are wary about plans to extend the right to request to all staff.

Mr Cridland added:
Flexible working has been a success story, but firms are still wary about the Governments plans to extend the right to request to everyone. Companies are most concerned about having to choose between competing requests. The Government must provide clear guidance to help employers balance requests fairly.
On employee relations, the survey found that two-thirds (68%) employers view the employment relations climate in their organisation as co-operative or very co-operative. Other findings include:
levels of morale across all companies remains quite high with 41% of employers describing it as high or very high, and 15% as low
three-quarters (76%) of non-unionised businesses describe employee relations as co-operative or very co-operative, compared with 58% of organisations which recognise a trade union for collective bargaining
one in ten employers are predicting an adversarial climate in the coming the year
nearly all employers (99%) report using at least some regular mechanism for communicating with staff, including staff meetings, briefings by team leaders and email updates and 61% say employee engagement will be a priority.


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