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Economic confidence and skill shortages to create pay pressure for employers in 2016

Salaries increased by 2.3% in 2015, with over two thirds of employers expecting to increase pay again next year

59% of employees expect to move jobs within the year and over half will enter 2016 dissatisfied with pay

War for talent continues with 74% of employers looking to hire additional staff next year

Over three quarters cite a lack of suitable candidates as one of their biggest challenges when recruiting

Salary pressure increases in 2015

The analysis of salary data from Hays job listings, job offers and candidate registrations showed salaries in 2015 grew on average 2.3% nationally, up from 1.8% in 2014, with employees in construction and IT seeing the biggest jumps, at 3.6% and 2.8% respectively.

The average wage growth in these sectors masks substantial pay rises of over 10% for some qualified, professional and skilled workers. In construction double digit salary growth was enjoyed by those working in a number of specific roles, including contract and project managers and quantity surveyors. Similar increases were enjoyed by some in the IT sector too, including those working in project and change management and development roles in some areas of the UK.

Across the UK, some of the biggest salary increases outside of London and the South East were in the South West, where salaries increased 2.7%.

These increases surpassed employers’ expectations, with 68% of employers awarding salary increases compared to the 60% who predicted they would do so 12 months ago.

Pay pressure to gain momentum in 2016

It appears pressure over pay is only set to increase next year. Over three fifths (66%) of employers expect to increase salaries in 2016 and nearly one in five (17%) expect to increase salaries above 2.5%, according to the annual survey.

Engineering and financial services employers are likely to feel the biggest pressure to increase salaries next year, with 76% and 74% respectively expecting to increase salaries. While construction and IT employees will continue to experience some of the biggest increases in salary with a third (28%) of their employers set to increase pay above 2.5%.

Outside of London and the South East, employers in the East of England and the East Midlands appear most bullish about increasing salaries in 2016.

Economic confidence to create a more fluid jobs market

The findings show that increased confidence in the economy has led to 68% of employers expecting business activity to increase over the next 12 months and 74% looking to hire additional staff.

There are consequences for staff retention too, however, with three fifths (59%) of employees planning to change jobs during the coming year. Employers in social housing and banking are due to experience the biggest exodus of staff in the next twelve months, with 74% and 65% respectively saying they are looking to leave.

With over half the UK workforce (55%) saying they are dissatisfied with their current salary and a third (31%) moving jobs for this reason, it would appear that employers will need to dig deeper into their pockets to retain their best talent and take on additional work next year.

Skills shortage pushing up pay

A more fluid jobs market and dissatisfaction with pay will be compounded by the UK’s skills shortage, putting further pressure on employers to pay even more for the talent they need.

Four fifths (79%) of employers say one of the biggest challenges they face when recruiting is a shortage of suitable applicants and a third (31%) say they don’t have the talent to achieve their business objectives, both similar numbers to last year.

Nigel Heap, Managing Director of Hays UK & Ireland, said:

“Increasing confidence in the UK economy is seeing businesses predict a busy 2016. The impact on the employment market is a further shift in power to candidates as they look for better pay and opportunities too. This, combined with the UK’s skills shortage, is likely to create a pay & lsquo;pressure cooker’ in 2016 which employers need to be prepared for.”

“The UK’s skills shortage is a real concern and will only put further pressure on employers next year. We need to ensure that the UK is open for business to overseas talent and that there is further investment from businesses in training and skills development. It will be those employers who can offer competitive remuneration packages, clear career development paths and relevant training programmes that will be best placed to attract the top talent required to succeed next year. Those that don’t, risk stifling their growth plans.”

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