UK bosses switch focus to training existing staff to fill workforce gaps

UK employers with gaps in their workforce increasingly plan to train existing staff rather than raise wages to lure new recruits, according to a survey that suggests pay pressures may be easing.

About two-thirds of employers expect to have difficulties filling vacancies over the next six months, and one-third expect these difficulties to be severe, the CIPD organisation for HR professionals said in its quarterly labour market outlook, published on Monday.

But fewer now think they can solve recruitment problems by offering more money. Among those with hard-to-fill vacancies, only 27 per cent planned to respond by raising wages, compared with 44 per cent who had already done so over the previous six months. In contrast, 37 per cent said they planned to boost the skills of existing employees, while a similar proportion were aiming to improve the availability of flexible working arrangements.

Jon Boys, labour market economist at the CIPD, said the research suggested “employers are running out of steam on their ability to increase pay any further” and were increasing their focus on retention of existing staff, because it was increasingly difficult to hire outside. He added: “They are saying that it’s very hard to buy in new skills at the moment . . . they need to inculcate them.”

The CIPD’s survey, conducted in April, also found that employers were increasingly unlikely to absorb higher wage bills in their margins, with a growing proportion planning to raise prices.

A cooling in wage growth would come as a relief to policymakers at the Bank of England, who warned earlier this month that rapid increases in nominal earnings could make high inflation persist for longer — even though pay is rising much more slowly than prices.

But the BoE believes pay pressures are if anything likely to strengthen, after hearing from its agents that some businesses are considering one-off bonuses and mid-year increases in pay settlements.

The CIPD’s finding that businesses would resist raising wages to attract new staff was also at odds with evidence from other surveys. Last week, the monthly report from the Recruitment & Employment Confederation showed the proportion of recruiters reporting higher starting salaries remained near record levels in April.

The CIPD acknowledged that pay awards were still running at historically high levels. Among employers planning a pay review over the next 12 months, the median increase in basic pay they anticipated was 3 per cent — the highest since 2012.

Even in the public sector, where budgets are tighter, the median pay award expected by employers had risen to 2 per cent, up from 1 per cent in the previous quarter.

But Boys said public-sector employers — who were even more keen to hire than their private-sector counterparts, but less able to increase pay and other benefits — could find it “increasingly difficult . . . to compete for talent”.

Overall earnings growth in the economy is generally higher than pay awards, because some people win a bigger pay rise through promotion, changing jobs or receiving a bonus.