An unprecedented drop in candidate availability and greater competition for workers has led to a record increase in starting salaries for permanent staff and a steep rise in pay for short-term roles, according the latest monthly figures from the REC.
The Recruitment and Employment Confederation and KPMG’s Report on Jobs signalled a further rapid increase in hiring activity during August, as improved business confidence led employers to ramp up resourcing plans.
Compiled by IHS Markit from a survey of 400 recruitment and employment consultancies, the latest set of data on permanent and temporary hiring activity, pay, and candidate availability breaks numerous records.
The number of vacancies increased rapidly during August, at rate slightly below July’s all-time record, as demand for both permanent and temporary staff remained robust. But candidate supply worsened to the greatest extent since the REC survey began in 1997.
The data showed that unprecedented falls in the supply of permanent candidates and temporary staff supply were widely associated with a reluctance among employees to switch roles due to the pandemic, fewer EU workers, furloughed staff and skill shortages.
The increased competition for staff placed more upward pressure on starting pay, with salaries for newly-placed permanent staff increasing at the fastest rate on record, while temps’ wage inflation was the second-quickest on record.
Claire Warnes, head of education, skills and productivity at KPMG UK, said: “Candidate shortages continue to plague businesses, who are all recruiting from the same pool of talent and struggling to fill gaps. While record high permanent placements and higher starting salaries mean it remains a jobseeker’s market, recruiters and employers have seen the most severe decline of candidate availability in the survey’s history and will be thinking about how to attract and retain new staff.”
Neil Carberry, chief executive of the REC, said: “Recruiters are working around the clock, placing more people into work than ever as these figures show. Switching the entire economy on over the summer has created a unique demand spike, and a short-term crisis.”
But he said it would be a mistake for businesses to think it was a short-term issue, saying a number of factors mean that the UK labour market will remain tight for several years to come.
All four English regions recorded faster rises in permanent placements, led by London where growth hit a new high. Unprecedented upturns were also seen in the North and South.
London also registered the fastest rise in temp billings, while only the North recorded slower growth compared to July.
The private sector continued to record much stronger increases in vacancies than the public sector. The strongest growth in demand was for IT and computing, closely followed by hotel and catering.
Carberry added: “Business leaders should be looking now at how they will build their future workforces, in partnership with recruiters, including the skills and career path development. But attracting and retaining staff also requires a serious assessment of why workers want to work with the firm – from management approaches to facilities, as well as pay.
“Government can help too, by aligning skills offers with business needs and making sure the new immigration system works. But government also must prioritise alleviating the immediate crisis – we’d like to see a joint forum where government departments and business can collaborate to tackle worker and skills shortages.”
Warnes said: “This crisis isn’t going away, and the winding down of the furlough scheme at the end of September – while potentially bringing more job hunters to the market – could also add fuel to the labour shortage fire.”