Last reviewed 20 May 2022

While the most common response made in the past six months by employers with hard-to-fill vacancies has been to increase pay (44%), only 27% of organisations plan to raise wages in response to recruitment difficulties in the future.

This is one of the key findings of the latest quarterly Labour Market Outlook report, published by the Chartered Institute of Personnel and Development (CIPD) and available at www.cipd.co.uk.

It surveyed more than 2000 employers across all sectors of the economy in April 2022 about their hiring, pay and redundancy intentions for the second quarter (Q2) of 2022 and found that, for the second consecutive quarter, median basic pay increases are expected to be 3%.

This means that they are sustained at the highest level recorded since the report series started in its current form in early 2013.

CIPD labour market economist, Jonathan Boys said: “The prospect of bumper pay awards will take the edge off high inflation for some workers, but it will still be strongly felt by many people struggling with the rising cost of living. Our research also suggests that employers are running out of steam on their ability to increase pay any further, so they’re switching their focus to retention and keeping their existing workforce happy.”

The latest KPMG and REC (Recruitment and Employment Confederation) “UK Report on Jobs” has also looked at this issue and notes that demand for staff rose in April at a historically sharp pace with a combination of robust demand for staff and scarce supply driving further marked increases in starting pay.

REC Chief Executive Neil Carberry said: “The labour market has been tightening for months on end, driving near-record growth in starting salaries for new staff. With vacancy numbers also historically high, this is a great time to be looking for a job – and a pay rise to help meet the rising cost of living.”

Comment by Kate Palmer, HR Advice and Consultancy Director at Peninsula

The “Great Resignation” forced organisations to rethink and improve their employee offerings. Starting salaries are amongst the highest seen in recent years and investment into additional rewards programmes continues to increase, in line with employees’ growing expectations.

The onset of the Covid pandemic saw a shift in employees’ priorities. Many are focusing on creating an effective work-life balance and expect their employment benefits packages to reflect this.

As such, organisations which fall short of offering flexible working arrangements, enhanced family-related pay and leave entitlements (eg maternity, paternity etc), pension contributions and social initiatives risk losing key workers.

Pay and bonuses will always be a basic motivator for employees, but this is no longer sufficient at attracting and retaining staff on its own. Instead, reasonable remuneration packages must work in tandem with additional rewards programmes.