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The REC Jobs Barometer February published

Key Points from February Survey

More than one in four (28%) employers state that they will give all or some staff a pay rise this year.

Nearly half of all employers (48%) intend to increase use of agency workers in both the short and medium term.

Just 9% of UK hirers have spare capacity to take on more work with current staffing levels.

The proportion of employers who plan to increase headcount is at the highest levels since our survey began in March 2011.

Redundancy levels over the last year held within the public sector this month at 12%. With the next round of budget cuts taking effect from April 2014, this is an area to watch.

More than three-quarters of employers plan to take on more permanent staff.


SHORT-TERM OUTLOOK In the next 3 months, do you think that your organisation’s permanent workforce will increase or decrease? This month saw a further surge in confidence by a 7 percentage point rise in the positive net balance of employers intending to hire more permanent workers, with more than 3 in 4 (76%) saying they will hire more permanent staff. The positive net balance now exceeds two thirds of employers (69%) and is at its highest level since the JobsOutlook survey began in 2009. This follows last month’s reported 5 percentage point rise.

MEDIUM-TERM OUTLOOK In the next 4–12 months, do you think that your organisation’s permanent workforce will increase or decrease? The proportion of employers intent on increasing permanent headcount in the medium term also took another sizeable stride forward this month, up 10 percentage points, following the substantive 13 percentage points rise reported last month. Just over eight in ten employers (81%) now plan to increase their permanent staff in the medium term. The positive net balance of 79% is the highest recorded since records began.

OUTLOOK BY EMPLOYER SIZE Net balance of short term expectations by employer size – permanent staff Enterprises of all sizes registered a further increase in intent to hire permanent workers in the short term this month. Most notable is the shift in sentiment within micro-business from the 18% positive net balance reported last month to 47% on this occasion. It is worth noting that microbusinesses represent 95% of UK’s private sector businesses, employing 32% of the private sector workforce.

SKILLS SHORTAGES AND QUALITY OF HIRES Where do you expect to see a shortage of workers this year? An anticipated shortfall in the skills required to both build/rebuild organisational infrastructure and service client demand – in terms of technical/engineering and accounting financial capabilities – are prevalent this month. In addition, concern over the sufficient availability of workers within the hospitality sector points to the potential of renewed buoyancy of demand from both business and tourism.

Temporary Recruitment

SHORT-TERM OUTLOOK In the next 3 months, do you think that your organisation’s use of agency workers will increase or decrease? This month short-term demand for agency workers holds, recovering the one point lost in the positive net balance reported last month. This period of stability is all the more notable as it follows the significant step up of 9 percentage points recorded in the last quarter. 

OUTLOOK BY EMPLOYER SIZE Net balance of short term expectations by employer size – agency staffing A 7 percentage point increase in the positive net balance of large employers intent on engaging more agency workers over the next quarter is noteworthy. An uptick in positive intent amongst micro-businesses is also worthy of mention, particularly following two months of reported decline in their intention. 

MEDIUM-TERM OUTLOOK In the next 4–12 months, do you think that your organisation’s use of agency workers will increase or decrease? Employers plan to increase their use of agency workers in the medium term, following the sizeable hike of 10 percentage points in the positive net balance reported last month.  Almost half of employers (48%) plan to increase use of agency workers and just 5% of hirers predict a slight decrease in need.

SKILLS SHORTAGES AND QUALITY OF HIRES Where do you expect to see a shortage of workers this year? The front-line skills within the service sector and those required to build/rebuild organisations’ own infrastructure where the greatest competition is anticipated. This is a similar pattern to that witnessed for anticipated shortages amongst permanent workers. There could be challenges ahead for the hospitality sector with employers foreseeing a shortage of agency workers in this sector as well as the aforementioned anticipated shortfall of permanent candidates.  

Labour Market Dashboard

TOTAL EMPLOYMENT – PERMANENT AND TEMPORARY Total employment surged by 459,000 in the last year, with a significant contribution from the rise in self-employment. The number of people who are self-employed increased by 211k in November–January against August–October, and now stands 285,000 higher than the same period last year. Amongst temporary workers, there was a 9.5% (63,000) year-on-year fall in those engaged in this way as a result of being unable to find permanent work.

UNEMPLOYMENT AND CLAIMANT NUMBERS UK unemployment held at 7.2% this month. This is 0.7 percentage points lower than the same period last year. People unemployed for up to two years declined against last quarter and year-on-year, and there was a slight increase for those out of work for more than two years, which is made up 450,000. Just under one fifth (19.8%) of those aged 16–24 are unemployed. At 912,000 this is a decline of 81,000 down on last year. 

LLOYDS BUSINESS BAROMETER Sentiment of UK firms about their own trading prospects equalled an all-time high this month, rising 3 points to 66 – a level last seen in February 2007.  But this confidence was entirely driven by southern-based companies in business and other services. Whilst corporate confidence about UK economic prospects fell 10 points during February, the three-month average edged up and remains close to its recent peak.

CONSUMER CONFIDENCE INDEX It is encouraging that the substantial six point rise in the GfK Index last month continues to hold with no sign of correction. Just a year ago the Index stood at -26. When considering the whole history of the Index from 1974, the current level is above the lifetime average of -9.


WORKFORCE CAPACITY How much capacity is there in your business to take on more work? The proportion of employers with spare capacity to absorb more work, should it come their way, decreased again this month and is now at just 9% of UK plc. There is now a sense that the additional capacity that many added in autumn 2013 is increasingly reaching full utilisation. As the strong positive hiring trend data of this and last month’s reports suggests many employers will need to increase headcount soon. 

WORKFORCE PLANNING BY SECTOR Workforce changes made in the last year The period of stability has been restored faster to the private than the public sector (62% versus 56% made no adjustments last year). Whilst redundancy levels are still abating in the private sector, down 3 percentage points this month, they remained at 12% in the public sector. With another round of spending cuts taking effect in April 2014, we are likely to witness some turbulence in the public sector in the forthcoming months.       

WORKFORCE PLANNING What changes have you made to your workforce in the past year? A period of stability was restored over the last year for the majority of UK employers (55%), with those experiencing a need to make negative or controlling adjustments (make redundancies, reduce hours or pay and/or freeze headcount) down to just 25%.  

RECRUITMENT CHANNELS USED OTHER THAN AGENCY Where do you expect to see a shortage of workers this year? The proportion of temporary workers who directly approach employers for work remains significant at 18%. In addition, the proportion of hirers sourcing temporary workers through referrals channels increased again this month. These channels appear to be eroding the need to source from past applicants. Use of JobCentre Plus also appears to be diminishing.

CRITERIA USED BY EMPLOYERS TO SELECT AGENCIES How important to you are the following factors when it comes to choosing and using a recruitment agency to cover temporary positions? Service quality and cost remain the consistent determining factors for selecting agencies, the emerging importance of the provision of management information and market intelligence is evident. In hirers’ quest to hunt down those with available skills and prepare strategies for skills investment, awareness of the recruitment industry’s ability to inform such strategies is increasing and highlights the emergence of true partnership working.

TEMPORARY TO PERMANENT Percentage of respondents where at least one temp has become a permanent employee in the last 12 months The proportion of employers who has made a temporary member of staff permanent has dipped slightly to 79%. This may reflect the fact that workers are increasingly exercising choice to remain contingent and at more senior levels, workers may choose to take on projects and work towards outcomes.

IMPORTANCE OF AGENCIES TO EMPLOYERS  How important would you say that agency workers are for your organisation in terms of the following? The role of recruitment agencies in providing short-term access to key strategic skills achieved the top ranking position for the first time since this question was added to our survey in 2012. Short- term access to skills is ranked top alongside covering leave.

EMPLOYER SATISFACTION WITH AGENCIES USED IN LAST 2 YEARS How satisfied are you overall with the agencies you have used in the last 2 years? As general demand for workers in areas of skills shortages intensifies, agencies are under continuing pressure to source against areas of key strategic need. Under such circumstances, a net positive satisfaction level of 93% for agencies remains an exceptional achievement.


DO YOU ANTICIPATE INCREASING THE WAGES OF YOUR CURRENT EMPLOYEES AT YOUR BUSINESS/ORGANISATION THIS YEAR? More than one in four (28%) employers plan to give at least some of their staff a pay rise and one in ten plan to give all their staff a pay rise. In contrast, only 14% have opted not to give their staff a pay rise, whilst two in five (40%) are still undecided.

WHICH SECTORS ARE LIKELY TO SEE THE GREATEST  DEMAND FOR AGENCY AND PERMANENT STAFF  OVER THE NEXT 3 MONTHS?  A number of key areas are showing short-term demand at a two year high. These include agency workers with hospitality, professional and technical skills.  By contrast, demand for permanent industrial workers is at a two year low. Two other areas are showing notable buoyancy. Despite budget pressures within the NHS and Local Authorities, demand for both permanent and agency medical workers is resilient. And demand for agency workers is now 200 percentage points above the January 2012 base – up 65 percentage points in the last month alone.


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