Sharp increase in non-EU workers helps ease recruitment difficulties for skilled jobs

New CIPD/the Adecco Group research shows a brightening picture on pay but tightening labour market poses problems for employers

The sharp increase in non-EU citizens coming to work in the UK has helped to ease recruitment difficulties for medium and high-skilled roles, according to new research. Despite employment growing strongly over the past year, the number of applicants chasing each medium and high-skilled vacancy has fallen relatively modestly compared with the same period last year. However, the number of people applying for low-skilled roles has dropped by a fifth over the past year, suggesting that some employers may face significant recruitment challenges in the coming months.

The survey also shows that the overall fall in the number of applicants is putting upward pay pressure on a significant minority of employers. Median basic pay expectations in the private sector increased from 2% to 2.5% compared with three months ago. Median basic pay award expectations have also risen in the public sector from 1% to 1.5%. Overall, the average basic pay increase remains steady at 2%.

These are the findings of the latest quarterly Labour Market Outlook from the CIPD and the Adecco Group, a survey of 2,104 employers which explores their pay and hiring intentions.

Labour shortages – Alarm is sounding for employers with low-skill vacancies

Overall, the survey data shows that the supply of labour is constrained compared with previous years, particularly for low-skill vacancies. Where employers last filled a low-skilled vacancy, they received a median number of 16 applicants for that role. This compares with 20 applicants in the summer 2018 report and 24 applicants in the summer 2017 report. This may be partly due to subdued growth in the annual increase in the number of EU-born citizens in employment, which remains well below the pre-referendum average.

In contrast, the supply of medium-skilled and high-skilled applicants has held up relatively well. This can be partly attributed to the sharp increase of 123,000 non-EU citizens in the UK workforce between Q1 2018 and Q1 2019, the majority of which will have been subject to a skills threshold.  This compares with a decrease of 6,000 between March 2017 and March 2018 in the number of non-EU citizens in employment in the UK. This increase has been mainly driven by the buoyant recruitment of nurses and medical practitioners, partly following a relaxation to remove doctors and nurses from the Government’s migration cap in June 2018. According to the latest official data that looks at employment levels by country of birth, non-EU citizens account for more than a third of the 364,000 increase in employment in the UK between Q1 2018 and Q1 2019*.

Recruitment Outlook – jobs growth set to continue but at a slower pace

Employment confidence remains robust but saw a modest fall in the last quarter. The report’s net employment balance – a measure of the difference between the proportion of employers who expect to increase staff levels and those who expect to decrease staff levels – has fallen from +22 to +18, the lowest number recorded since Winter 2017. Employment confidence is highest in Wales (+29), Scotland (+21) and lowest in the East Midlands (+7) and the East of England (+7). The labour market remains tight, which is putting pressure on employers to increase pay.

Pay outlook – promising signs of pay pushing above inflation

Overall, median basic pay increase expectations remain at 2% for the 12 months to June 2020. Median basic pay increase expectations in the private sector have increased from 2% to 2.5% and from 1% to 1.5% in the public sector, compared with the last quarter.

Of particular note is the increase in the number of employers expecting a basic pay increase of more than 3% in the next year. More than a third of employers (36%) plan to increase basic pay by at least 3% compared to 28% of employers in the same period last year.

The key factors driving pay awards of 2% or more are inflation (43%) and the going rate of pay elsewhere (37%). Recruitment and retention difficulties were also a factor (29%).

Gerwyn Davies, senior labour market adviser for the CIPD, the professional body for HR and people development, said:

“Amidst the current political uncertainty, the UK labour market is holding up surprisingly well. Labour demand remains strong, and the robust supply of non-EU workers has helped many employers meet this demand; partly owing to the Government’s decision to remove the migration cap for doctors and nurses.

“This has been key to freeing up visa capacity for employers in other sectors who have sensibly been able to resolve skill shortages by hiring non-EU migrants. Looking ahead, the Government’s post-Brexit immigration policy must demonstrate similar levels of flexibility to ensure that such shortage occupations benefit from a more generous minimum salary threshold

Davies continues, “However, the alarm bell is sounding for employers trying to fill low-skill roles, many of whom are still in wait and see mode. It’s essential that those employers are prepared for reduced numbers of candidates and further restrictions to low-skill labour planned from 2021 with a workforce plan.”

Alex Fleming, Country Head and President of Staffing and Solutions, the Adecco Group UK and Ireland, said:

“In our tightening labour market ensuring businesses have the right supply of talent isn’t a new issue and during these uncertain times the “grow your own” mentality has become more important than ever for organisations. Workforce planning comes into play again as organisations need to be constantly looking forward and anticipating their future needs and training their own talent accordingly.

“Planning ahead for workforce strategies is a long-term solution that now needs to be addressed more urgently than ever so the labour market can thrive with the right talent in place.

“Conversely, in the shorter term imaginative recruitment strategies are also needed to find the right kind of skillsets to bring into organisations, for example unlocking hidden pools of talent can hold considerable value for employers and should be seriously considered as an important source.

CIPD Press Enquiries

Isabella Uhlig

Press office: 0208 612 6400 / Out of hours: Isabella Uhlig, 07540 392931

press@cipd.co.uk

The Adecco Group Press Enquiries

Micky Izelaar

Press office: 0203 837 3687 / Out of hours: Micky Izelaar, 07584 050138

Adecco@octopusgrp.com

Notes to editor

  • *These figures are not seasonally adjusted
  • Gerwyn Davies, CIPD Senior Labour Market Adviser is available for interview and further comment across 9th-12th August
  • Media can request interviews or a copy of the Labour Market Outlook report in advance via the CIPD press office press@cipd.co.uk/ 0208 612 6400
  • The report will be available to download from 00.01 on Monday 12th August 2019 at cipd.co.uk/lmo
  • The CIPD/the Adecco Group Labour Market Outlookprovides a set of forward-looking labour market indicators, highlighting employers’ recruitment, redundancy and pay intentions. This latest survey is based on responses from 2,104 HR professionals and senior decision-makers and fieldwork was undertaken in June The figures have been weighted and are representative of UK business by size, sector and industry.
  • The CIPD is the professional body for HR and people development. The not-for-profit organisation champions better work and working lives and has been setting the benchmark for excellence in people and organisation development for more than 100 years. It has a community of 150,000 members across the world, provides thought leadership through independent research on the world of work, and offers professional training and accreditation for those working in HR and learning and development. cipd.co.uk
  • The Adecco Group UK&I and its brands are part of the Adecco Group, the world’s leading HR solutions partner. As a Group, we provide more than 700,000 people with permanent and flexible employment every day. With more than 34,000 employees in 60 countries – 3,100 in the UK&I – we transform the world of work one job at a time. Our colleagues serve more than 100,000 organisations with the talent, HR services and cutting-edge technology they need to succeed in an ever-changing global economy. As a Fortune Global 500 company, we lead by example, creating shared value that meets social needs while driving business innovation. Our culture of inclusivity, fairness and teamwork empowers individuals and organisations, fuels economies, and builds better societies. These values resonate with our employees, who voted us number 5 on the Great Place to Work® – World’s Best Workplaces 2018 list. We make the future work for everyone.
  • The Adecco Group is based in Zurich, Switzerland. Adecco Group AG is registered in Switzerland (ISIN: CH0012138605) and listed on the SIX Swiss Exchange (ADEN). The Group is powered by nine lead brands: Adecco, Modis, Badenoch & Clark, Spring Professional, Lee Hecht Harrison, Pontoon, Adia, General Assembly and YOSS. The Adecco Group UK&I’s head office is located in London, UK. We have 10 brands, including the Adecco Group UK&I, Adecco, Ajilon, Badenoch & Clark, Modis, Office Angels, Penna, Pontoon, Roevin and Spring.