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Record rise in starting salaries as permanent candidate availability plummets

Record fall in permanent staff availability in June&hellip

The latest survey of UK recruitment consultancies indicated a considerable reduction in the availability of staff to fill permanent roles. The rate of contraction accelerated to the sharpest seen in the survey history, which began in October 1997. Temporary/contract staff also recorded a sharp deterioration in availability, with June’s drop the greatest seen since March 1998.  

...helps drive starting salaries up at series record pace...

Amid reports of a short supply of suitable candidates, and with demand for staff increasing, permanent salaries rose during June at a survey record rate. Salaries have now risen for twenty-six months in succession.

Moreover, temporary/contract staff hourly pay rates rose at the sharpest rate since November 2007. 

&hellipas demand for staff continues to grow...

Latest vacancy data indicated faster increases in the demand for both permanent and temporary staff during June. Growth was led the private sector, with demand here continuing to rise at a rate that comfortably outstripped those seen in the public sector.

...and placements rise

As companies sought to efficiently fill vacancies, permanent placements continued to increase during June. Although remaining sharp by historical standards, the rate of growth was the lowest seen since last November.

Temporary/contract staff billings in contrast increased at the sharpest pace for five months.

Regional and sector variation

Of the four broad English regions for which data are available, the sharpest increase in permanent placements was seen in the Midlands, closely followed by the South. London remained a relative laggard, although even here growth was historically strong.

Leading the way in terms of temp billings growth was the Midlands followed by the South. The North saw a stronger increase in temp billings, but London recorded a slower rate of expansion.

June’s survey results again showed that demand for staff continued to increase at a considerably quicker rate from the private sector for both permanent and temporary workers. 

In both the public and private sectors, demand for temporary workers rose at rates that outstripped those seen for permanent staff. 

Engineering was the best performing sector in the demand for staff & lsquo;league table’ during June. Construction also continued its recent strong performance, recording a considerable rate of growth. Hotel & Catering was the weakest performer.

Engineering workers were also the most in-demand type of temporary staff during June, followed by Blue Collar and then Construction. Demand for temporary staff is rising at stronger rates across all categories when compared to 12 months ago, with the exception of Nursing/Medical/Care.

REC director of policy, Tom Hadley, said, "June saw record growth in starting salaries and yet another monthly increase in the number of people securing a permanent job.

“However, this month sees the number of workers available to fill vacancies plummet to an all-time low, in particular across business development and sales roles that are vital to boosting bottom lines. There are also persistent shortages across IT and engineering, which are becoming a serious threat to economic growth.

“The message to UK businesses is that it is crucial to sharpen up hiring procedures in an increasingly candidate driven market.  The message to government is that we need to reform the visa system to satisfy immediate demand for skills, whilst stepping up measures to boost the UK skills base for the long-term.”      

Bernard Brown, partner and head of business services at KPMG, commented, “Once again employers seem ready to & lsquo;splash the cash’ in what appears to be a desperate attempt to lure skilled staff from competitors.  Yet despite offering starting salaries at a rate that has not been seen during the survey’s 17 year lifetime, it is clear that candidates are not easily swayed.  As consumers they may be facing rising house prices and struggling to build financial reserves because of low interest rates, but the desire for extra disposable income is not yet translating into a generation of employees who are only loyal to their monthly pay cheque.

“It’s a message employers would do well to take to heart as, although many might argue that by offering higher pay packets, they are showing market confidence, the truth is that continued starting salary growth is unrealistic and unsustainable over the long term.  Ultimately candidates are also suggesting this by voting with their feet, because we have also just witnessed the biggest fall in candidate availability for 17 years.  Perhaps this means that the productivity gap is being replaced with another chasm – a vacancy vacuum – and one that is unlikely to be resolved until employers recognise that, for staff, remuneration is about much more than take home pay.”

Phil Harmsworth, director at The Work Shop, said, “I have been predicting this for the last few months. Having been in the recruitment industry during the last recession I can remember what happened then and history is repeating itself.

"The demand for both permanent and temporary staff is rising fast and this points to a real problem for employers that rely on temporary staff as job seekers ordinarily would prefer permanent work and therefore temporary staff availability is suffering.

The message to our clients is clear, don’t expect loads of CVs for your vacancies, act quickly if you are sent a good CV, don’t delay hiring decisions and be as flexible as possible as far as salaries are concerned. We are already seeing some clients that have lengthy recruitment processes struggling to find people and some are giving their vacancies to more and more recruitment agencies but that is not the answer as we are all fishing in the same, ever decreasing ponds.”

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