Report on Jobs: Starting Salary Inflation Moderates
The KPMG and REC, UK Report on Jobs uniquely provides the most comprehensive guide to the labour market, drawing on original survey data provided by recruitment consultancies, such as Redline Group, and employers to provide the first indication each month of labour market trends. Here are the main findings from the December report.
- Overall candidate availability rose sharply.
- Temporary/Contract billings rose at the slowest rate in 33 months.
- Starting salary inflation eased further.
- Overall demand for staff weakened only slightly.
Recruitment Activity Slows Down:
The overall demand for staff weakened slightly in November after having stabilised slightly in October. This marked only the second time that total vacancies had fallen since February 2021. Recruitment activity was weighed down by lingering economic uncertainty and hesitancy to commit to new hires during November, stretching the current period of decline to 14 months. The rate of contraction accelerated to the second sharpest since June 2020, when hiring was hit during the initial phase of the pandemic. Yet, the number of open roles was nearly 16% above that registered just prior to the pandemic (826,000 in the three months to February 2020).
While permanent staff hiring contracted, contract/temp billings fell at a much softer pace, signalling employer interest in the flexibility of contract workers during the current economic environment.
Speaking about this, Claire Warnes, Partner, Skills and Productivity at KPMG UK, said: “Businesses want to plan for the year ahead, but the prospect of faltering UK economic growth means the certainty they need isn’t there. This is now impacting starting salaries, as pay inflation isn’t as sharp as in previous months. Even contract/temp staff billings - which have given much-needed flexibility to employers. With the Bank of England looking like it will be keeping interest rates high for now, businesses will need to stay resilient to manage this period of flux.”
Demand for permanent staff fell in half of the ten monitored categories in sector data while short-term vacancies rose in just over half. Engineering, however, had the second-highest increase in permanent staff demand and third-highest rise in contractor demand. Skills shortages in permanent and contract/temp staff were noted for the following specialist areas: Electronic Design, RF, Software, IT and Data Engineering, along with AI Developers, and Cyber Specialists.
Salary Inflation Rate Moderated:
During November, the rate of starting salary inflation across the UK moderated. While strong overall, the previous month’s increase in permanent pay was the softest seen in 32 months and slipped below the series long-run average. Adjusted for seasonal influences, the Temporary Wages Index also showed a further rise in pay for short-term staff in November. With that being said, the inflation rate slipped to a modest pace that was the slowest seen since the current period of pay growth began in March 2021.
Competition for skilled candidates was cited as the main driver of salary growth once again. However, there were some reports that clients were under greater budgetary pressures, which had led to the inflation rates moderating. Though several recruiters mentioned that contract/temporary wages rose in line with inflation, others indicated that remuneration rates had levelled off.
Over the third quarter of 2023, total employee earnings (including bonuses) expanded +7.9%, based on latest ONS (Office for National Statistics) data. This was down from +8.4% in the second quarter of the year, but still one of the quickest growth rates on record. The softer upturn was largely driven by a slower rise in public sector pay (+8.6% over Q3, down from +10.7% in Q2). Earnings in the public sector were buoyed due to one-off payments across the NHS and civil service in recent months. On the other hand, private sector earnings expanded +7.7% over Q3, down slightly from +7.8% in Q2.
Neil Carberry, REC Chief Executive, summed up the discussion by saying: “Anecdote from REC members supports our client survey finding that employers are considering coming back to the market, but that in many cases the activity will be next year. So, while these figures represent a further slowdown in current hiring conditions, recruiters are more positive about the new year”
Within the dynamic world of business, employers must be attuned to shifts in economic conditions as they make crucial decisions regarding hiring and financial strategies. Economic confidence is a major indicator that influences their decisions. Post-covid, employers have faced many challenges, including uncertainty stemming from global events and economic uncertainty. Factors such as inflation, interest rates, geopolitical tensions, and supply chain disruptions all played a role in shaping employer confidence.
Yet, by the end of 2023, the flux in the wider workforce is easing up employers are growing more and more optimistic in hiring, especially when it comes to contract/temp workers.
Redline Group changes lives every day, building world-class teams for technology companies. We continue to be one of the UK’s most trusted Electronics and High Technology recruitment specialists for professional Contract, Permanent, and Executive positions. With four decades of experience our passionate, knowledge-led people create trusted recruitment solutions. Redline is perfectly positioned to offer advice about future-proofing your permanent, contract and interim needs in the technology sector.