Winter pay outcome in the balance as recruitment difficulties worsen

The latest CIPD/KPMG quarterly Labour Market Outlook survey finds that a majority of employers expect to award staff pay rises of less than 3.5% in the busy winter pay round. But with recruitment difficulties expected to worsen at a time when employees are looking to match the recent spike in price inflation, at least 1 in 5 employers appear to be keeping their pay options open.

Pay outlook uncertain

58% of employers expect pay rises of less than 3.5%, with around a third (32%) expecting pay to rise on average by between 3% and 3.5%. Only 13% expect pay to rise on average by 4% or above. However, 1 in 5 employers were uncertain of the outlook for pay at the time of the survey. The Spring will be the busiest period for pay reviews, with around 61% of employers planning to conduct one between now and the spring quarter.


Worries about recruitment as recruitment intentions rise

82% of employers surveyed will be recruiting staff in the next three months, up from 79% in the autumn quarter. But 46% of employers surveyed anticipate recruitment difficulties this quarter, higher than the autumn figure (44%).


Net recruitment stable with more redundancies expected

42% of employers surveyed intend to recruit additional staff (i.e. over and above replacement recruitment) this quarter, the proportion having remained as a broadly similar level since spring 2006. There is an increase in the proportion of employers intending to make some staff redundant - up from 20% to 23% since the autumn survey. The increase is evident in all broad sectors of the economy, but especially in the public services where 30% of employers intend to make redundancies.

Medium term employment outlook improves - but public sector employers pessimistic

There is a 17% positive balance of employers expecting to employ more staff over those expecting to employ fewer in a year's time - an improvement on the positive balance of 13 reported in the autumn 2006 survey and slightly above the 16% positive balance reported in the summer 2006 survey.

Employers in the private services sector report a strong positive balance of 36%. The balance is also above average in the manufacturing and production sectors (23%) and the voluntary sector (20%) but strongly negative in public sector services (-20%).

Dr John Philpott, Chief Economist at the CIPD, commented
that the survey highlighted a number of conundrums that
bedevil attempts to interpret the current state of the
jobs market:

"On the face of things conditions in the labour market
look conducive to moderate pay settlements this winter,
with enough willing workers, especially migrants, to help employers withstand claims for inflation matching pay rises. But as our survey shows, the situation on the ground is more complicated.

"Aside from the commonly observed tendency for some pay settlements to track the Retail Price Index seemingly regardless of the balance of supply and demand, a growing proportion of employers report difficulty in finding recruits with the attributes they are looking for. Lack of quality in the available labour supply might therefore mean that the market is tighter and potential wage pressure higher than measures of the amount of labour available suggest.

"While our survey overall still suggests that the winter pay round will prove benign for interest rates and jobs, we are as yet far from being able to breath a sigh of relief".