With the cost-of-living crisis continuing to intensify, inflation increasing and the probability of the economy entering a recession becoming more and more likely, employers and employees are considering what they need to do to successfully weather the storm.
In March 2023, inflation in the UK sat at 10.1%, the highest levels reported since 1982. Unfortunately, there’s little chance of these levels decreasing any time soon. The Bank of England has already predicted that inflation will remain elevated for the rest of this year.
As a result, energy bills, food, fuel, and other living costs remain high, putting immense pressure on the general public, with many having to make considerable cutbacks to stay afloat.
It’s an undoubtedly a challenging time for employees and employers alike and begs the question of just how much of an impact the cost-of-living-crisis is having on the UK jobs market.
Rise in salaries
In this period of uncertainty, it's unsurprising that many employees are considering applying for new roles sooner rather than later. In our 2023 Remuneration and Engagement Survey, we found that 21% of our respondents, who work in construction, property and real estate roles, intended to leave their roles within the next year.
While their motivations for leaving their roles varied from better benefits to low job satisfaction, 78% of our respondents said that a better salary would be a reason why they would look for a new role. Career progression and the desire for a new challenge were also important factors for employees thinking of leaving their current roles. In previous years, work-life balance was often considered a top priority by many employees, but these new findings suggest that in the midst of the current crisis many are placing greater importance on salary.
With this in mind, many employers are now under pressure to provide pay rises to their employees or risk a potential mass exodus from their organisation. According to a recent study by the Chartered Institute of Personnel and Development (CIPD), UK businesses are expected to give 5% pay rises this year, the highest increase since 2012.
This rise is echoed in our Remuneration and Engagement Survey findings, where 77% of our respondents said their salary had increased over the past 12 months. Even so, more than a third of those who had received pay rises said they were still unhappy with their annual salary. Unfortunately, not every company is in a position to offer competitive salaries; for those that are, a 5% rise would still not be enough to outpace the current rate of inflation across the economy. Our findings indicate that for many employees recent pay rises have not kept pace with inflation.
The latest Labour Market Outlook report from the CIPD found that, even though the crisis is causing a rise in job seekers, two in five employers currently have hard to fill vacancies. It’s unclear whether this is due to unattractive salaries and benefits or a lack of available talent for more niche or specialised roles.
While increasing salaries could be a possible answer for some, the report found that upskilling had become increasingly popular amongst its respondents. 50% said that they have started using upskilling over the past six months to cover the gaps left by their unfilled roles.
This is a handy solution for employers but could also have benefits for employees too. In addition to higher salaries, our Remuneration and Engagement Survey found that a lack of career progression was one of the main reasons why employees are choosing to leave their current roles. Upskilling and reskilling could provide an opportunity for employees to achieve further career progression by learning new skills and enhancing their existing ones. This in turn could help employers retain their existing teams more effectively.
With the cost-of-living-crisis forcing many businesses to resort to cost-cutting solutions such as rolling back benefits, reducing incentives and, in some cases, redundancies, there is a risk that job satisfaction and employee morale could diminish. While these measures might be unavoidable for many, it could have a significant impact on staff retention in the long term, tempting employees to start hunting for higher paid roles elsewhere.
Even if many businesses are unable to offer pay increases during this time of crisis, it’s crucial that they don’t neglect to maintain a supportive and positive culture within their workplace. While salary might currently be at the forefront of employees’ minds, culture will continue to be an appealing factor for future hires and helps to support job satisfaction and happiness within an existing team. Offering more flexibility, such as a four-day work week, could be another possible alternative for employers to consider if they are unable to increase salaries but want to retain their best people.
No matter how tempting it might be, this is not the time for employees or employers to bury their heads in the sand and ignore what is happening around them. The cost-of-living-crisis, whilst challenging and uncertain, is not going anywhere and accepting that is imperative.
Employers will need to be empathetic and understanding of the struggles faced by their workforce, offer support when needed and keep their lines of communication open and transparent. In contrast, employees will need to carefully consider their career options and future prospects in the face of the continued economic and financial uncertainty.
To gain further insights on the impact of the cost-of-living-crisis on the jobs market, you can download our Remuneration and Engagement Survey for 2023 by clicking here.