Skills Gaps = Wage Inflation?

The tightening labour market is driving an increase in wages for key staff and new starters as employers continue to feel the impact of skills shortages...

The latest quarterly Labour Market Outlook from the CIPD, the professional body for HR and people development, shows that the net employment balance - the difference between the number of employers who expect to increase staff levels and those who expect levels to decrease - remains extremely positive at +22.

However, the much discussed UK skills shortage means that turning this desire and expectation for recruiting new blood into actual ‘bums on seats' is proving challenging. Some 70% of employers with current vacancies report that at least some of their roles are proving hard-to-fill, which is higher than in Summer 2018 (66%) and Spring 2018 (61%).

Additionally, over two in five of all employers state that it has become more difficult to fill vacancies over the past 12 months, while over a third say that retention pressures have risen during the same period.

This situation is impacting on many employers’ pay decisions, as almost half of organisations experiencing recruitment difficulties during 2018 have increased starting salaries. Pay hikes are also being used as a retention tool - over half of employers who have had trouble hanging onto staff over the past 12 months have responded by increasing salaries.

Our Verdict

The challenges caused by skills shortages and tight labour markets are not resolved overnight – there is no quick fix – but these conditions do provide opportunities for highly skilled and experienced people.

Employers need to plug gaps, but they need to do so in a sustainable way, with the right people, otherwise they risk compounding their problems with the added costs and frustrations of bad hires.

FRS can introduce you to a unique pool of talented professionals and help you take the risk out of recruitment. Learn more here.