Labour Market Outlook surveys

The quarterly Labour Market Outlook, produced in partnership with the The Adecco Group UK & Ireland is one of the most authoritative employment indicators in the UK and provides forward-looking labour market data and analysis on employers’ recruitment, redundancy and pay intentions.

Wages

Almost half (49%) of employers considering a pay review over the course of the year are anticipating an increase to basic pay. However, nearly as many (43%) say it is unknown at this stage which way it will go.

The findings also revealed a widening gap in pay expectations between the private and public sectors. Among private sector employers, the expected median pay has risen above 2% to 2.5% for the first time since tracking began in 2012. However, for the public sector, having climbed to a new high last quarter, pay rise expectations have slowed from 2% to just 1.1%.

Recruitment and retention

This quarter’s net employment balance, or the difference between the proportion of employers who expect to increase staff levels and those who expect to decrease staff, has dropped two points to +20 since last quarter. While this figure still represents a high degree of employment confidence, it does continue the narrative of a downward trend over the past four quarters.

The proportion of hiring employers with hard-to-fill vacancies edged higher again for the fourth successive quarter — 71% report that at least some of their vacancies are proving hard-to-fill. The level was at 64% a year ago.

Recruitment and retention continue to be pivotal challenges within a tight labour market, with 43% saying it has become tougher to fill vacancies over the past 12 months and 32% experiencing a similar problem in retaining staff. In response, a noticeably greater proportion of employers (56%) have raised starting salaries, up from 48% last quarter. Similarly, an increasing proportion (55%) of employers overall have used pay rises to help with retention.

Productivity and management practice

Employers are facing upward pressure to increase pay and so a renewed focus on productivity growth is needed to sustain this. The present predicament is that some 40% of employers either do not have measures of productivity in place or are unsure if they do, while half do not consider the term ‘productivity’ at all when talking about organisational performance. About two-thirds (64%) of employers do not have ‘improving productivity’ as a current priority.

A recent study by the Office of National Statistics examined the connection between management practices and productivity. Measures such as performance reviews, training, promotions and particularly managing underperformance, were seen as having the strongest positive correlation with productivity. Therefore, employers should invest in improving their management capability and encouraging high performance working practices for example, as part of broader considerations to raise organisational productivity.