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Latest NewsEconomics, government & businessJob creation and lossesLabour marketPay & benefits

ONS: Pay creeps up as vacancies hit another record

by Ashleigh Webber 15 Feb 2022
by Ashleigh Webber 15 Feb 2022 Filipe Samora / Shutterstock
Filipe Samora / Shutterstock

Average pay continued to creep up in December, as employers fought for talent to fill yet another record number of vacancies.

The latest UK labour market data from the Office for National Statistics shows that in October to December 2021, employees saw average total pay including bonuses grow 4.3% and pay excluding bonuses grow 3.7%.

Early estimates for January 2022 indicate that median monthly pay increased by 6.3% compared with January 2021.

However, the rising cost of living is beginning to cancel out any benefit employees might see from rising pay, with the ONS finding that real terms pay including bonuses fell 0.1%, and real terms pay excluding bonuses fell 0.8%, compared with October to December 2020.

Employers’ hiring spree continued in November 2021 to January 2022, when the number of vacancies reached another record high of 1.29 million – although the ONS notes that the rate of growth has continued to slow after it peaked last summer.

The ratio of vacancies to every 100 employee jobs continued to rise, reaching a record high of 4.3 in November 2021 to January 2022, with the majority of industry sectors displaying record high ratios.

The largest increase of vacancies was seen in accommodation and food services, which was up 21,400 to a new record of 178,300 vacancies.

Jonathan Boys, labour market economist at the CIPD, warned that employers will have to work even harder in 2022 to find and retain staff. He advised organisations to keep jobs as flexible as possible, invest in staff development and create internal progression opportunities in order to remain competitive.

“There is no doubt many employers will be under more pressure to raise wages this year as they face the twin pressures of helping workers deal with rising cost of living and further tightening of the labour market,” said Boys.

“The playing field is level here as all employers face this same pressure. However, not all are able to raise pay. Encouragingly, the CIPD’s research shows that many employers are thinking about the employment offer in the round, including opportunities for training and development.”

According to the CIPD’s recent Labour Market Outlook employers anticipate pay increases of 3% in 2022, the highest figure recorded by the HR body in a decade.

Niki Turner Harding, senior vice president at Adecco UK & Ireland noted that employers are unlikely to heed the Bank of England chief’s recent call for restraint when it comes to wage increases.

“The developing cost of living crisis is a factor here, as is the reality that better pay offers are a priority in the ongoing battle for talent,” she said.

“Ultimately, the twelfth consecutive month of increased employment is overshadowed by a labour market short of skills, increasing inflation, and the prospect of a new era of pay negotiation.”

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Early analysis by the ONS indicates that the number of employees on payrolls in January 2022 was 1.5% higher than February 2020, before the pandemic, and 4.8% higher than in January 2021, when the country was still under lockdown restrictions.

However, total hours worked are still below pre-pandemic levels and the employment rate is still 1 percentage point lower than it was in December 2019 to February 2020. The economic inactivity rate was estimated at 21.2%, 1 percentage point higher than before the coronavirus pandemic.

Neil Carberry, chief executive of the Recruitment & Employment Confederation, said: “With hours worked and overall employment still below pre-pandemic rates, the British jobs market has not yet recovered its full capacity. Given that it is inactivity – people not in jobs and not looking for one – that has risen, addressing the labour shortages companies face is a huge challenge.

Carberry said temporary work was “helping firms keep things moving”, but organisations and government now needed to work together to attract more people from a variety of backgrounds into the workforce to fill vacancies.

Given that it is inactivity – people not in jobs and not looking for one – that has risen, addressing the labour shortages companies face is a huge challenge.” – Neil Carberry, REC

“Failing to address shortages will only constrain growth and feed inflation,” he added.

Helen Barnard, research and policy director at Pro Bono Economics, said that a combination of rising ill health and falling real-terms pay showed the UK’s economic recovery was “leaving too many behind”.

“The proportion of people out of the labour market because of ill health has now hit a 20-year high at 26.4%,” she said.

“For those in work, pay is now falling as inflation continues to bite. With inflation increasing, this is going to impact millions who are already struggling.

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“Sustained and tailored support will be needed to turn this trend around. Charities disproportionately support people further from the labour market into jobs and will be vital in supporting those struggling to make ends meet.”

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Ashleigh Webber

Ashleigh is a former editor of OHW+ and former HR and wellbeing editor at Personnel Today. Ashleigh's areas of interest include employee health and wellbeing, equality and inclusion and skills development. She has hosted many webinars for Personnel Today, on topics including employee retention, financial wellbeing and menopause support.

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