Starting salaries grew at a steeper rate in April 2024 as employers continued to battle for staff in a dwindling pool of suitable candidates.
May’s UK report on jobs from KPMG and the Recruitment and Employment Confederation (REC) found that overall starting pay increased for the 38th month in a row.
Pay for temporary roles increased at its steepest pace since June 2023, while the rate of pay growth for permanent placements was the quickest seen so far in 2024.
UK labour market
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Candidate availably grew, which the report suggested was due to an increase in redundancies, but overall demand for staff has fallen for the sixth month in a row.
The number of permanent placements has now dropped each month since October 2022, with recruitment firms suggesting there is a lack of suitable candidates for their roles while employers remain hesitant to recruit.
Retail organisations recorded the strongest drop in demand for new starters in both permanent and temporary roles.
KPMG UK chief executive Jon Holt said: “UK CEOs continue to grapple with the [Bank of England’s] hawkish stance on interest rates, and will no doubt hope April’s survey data is another marker in the sand on the journey towards a summer cut.
“While there are still complexities, like pay rates improving due in part to last month’s 9.8% rise in the national living wage, overall pressure is easing on the labour market.
“Business leaders see this cooling, combined with weakening inflationary pressure, as indicators for the Bank to hopefully shift to a more dovish position. Companies would then have the confidence and certainty to press go on their investment strategies.”
However, Sheila Attwood, senior content manager at Brightmine, formerly XpertHR, said: “While the KPMG and REC report highlights an improvement in starting salaries in April to attract candidates, it’s a dangerous game offering above market rate salaries on a consistent basis.
“Yes, it might fix a short-term skills problem, but the longer-term consequences are going to be harder to solve. While the new hire is delighted with their salary, existing employees can get incensed that they’re not paid at the same rate, causing unnecessary friction among workers.
“Economic pressures and rapidly rising wage bills may lead to pay freezes and redundancies if organisations need to make savings, thereby losing those hard-fought skills anyway.”
She said employers wanting to avoid salary wars should look at their overall benefits packages. “Using benchmarking data, employers can review their existing package to make sure that what they are offering is not only aligned with workforce demographics, but also that the benefits match market trends,” said Attwood.
REC chief executive Neil Carberry said: “The critical moment in any labour market slowdown is the point at which demand starts to turn around. Today’s hiring data suggests that point is close, with fewer recruitment firms reporting a drop in demand.
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“Firms have told us all year that they will be willing to hire and invest in their business when confidence returns to the wider economy – and there is a glimmer of lower inflation and the prospect of lower interest rates starting to drive that now.”
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