Businesses boost pay and benefits to tackle recruitment challenges
A combination of rising energy costs, inflation and the cost of living crisis represents the greatest threat to two-thirds of businesses (65%) in the next six months, according to new research by accountancy and business advisory firm BDO.
The bi-monthly survey of 500 medium-sized businesses’ leaders shows recruitment and retention – including hiring costs and a shortage of talent – are a further cause for concern, with almost a fifth of businesses (19%) saying this is the biggest threat they face over the remainder of the year. While 29% of business leaders are actively focused on growing their workforce, almost a third (31%) of businesses are struggling to find staff with the right skills.
As a result, fierce competition for talent and the rising cost of living have heightened pressure on employers, with many raising salaries. More than half of businesses (52%) are raising pay by 4-8%, with more than a quarter (28%) increasing pay by 9% or more – in line with or above current rates of inflation. In London, almost three-quarters (73%) of mid-sized businesses are increasing pay by 9% or more.
Forced to rethink benefit packages, almost half (44%) of businesses are providing one-off bonuses to support colleagues through the cost of living crisis, with more than half (52%) offering more flexible working-from-home policies specifically to help employees cut travel costs. Almost half (46%) have offered new benefits in-kind, such as childcare support, free meals at work or shopping vouchers.
As businesses struggle to find the talent they need, a quarter (24%) are consciously trying to recruit from more diverse backgrounds, while 29% are investing in apprenticeship schemes.
However, despite the huge demand for talent, some businesses have been forced to press pause on hiring and growth as they continue to manage the impacts of inflation and mounting costs. Almost a quarter (24%) are taking on new debt, while a fifth (21%) are reducing the number of goods and services they offer. A similar number are also reducing headcount (21%), pausing hiring (21%) and putting the brakes on all new investment (20%) into their business.
Kaley Crossthwaite, partner at BDO LLP, said: “The challenges facing these businesses, which are the engine of the UK’s economy, aren’t going anywhere soon. Inflation and rising costs have placed profound pressure on business leaders. It is particularly concerning to see businesses taking on additional loans and credit to manage costs – despite rising interest rates.
“However, it is encouraging to see businesses focused on increasing the inclusivity of their recruitment strategies, with many investing in apprenticeship schemes or actively recruiting from more diverse backgrounds. With warnings that inflation could reach 11% or higher by the end of the year and the ongoing competition for talent, businesses are going the extra mile to offer real support for employees grappling with the cost of living crisis.”