Employment figures suggest jittery employers spooked by increasing labour costs
Poor productivity and increasing labour costs provide explanation for fall in total pay.
Commenting on the ONS Labour Market Statistics, Gerwyn Davies, labour market adviser at the CIPD, the professional body for HR and people development, said:
“Existing employer concerns over the cost implications of the National Living Wage, pension auto-enrolment and the impending Apprenticeship Levy are starting to affect confidence amongst employers. Against a backdrop of worries over a slowing economy, it’s perhaps not surprising that we’re starting to see employment growth ease off. Where employment growth has happened this is mainly due to the growth in the number of self-employed, suggesting that employers are in ‘wait and see’ mode over increases in employment costs and the EU Referendum.
“Overall, the data makes the case for improved productivity an even more pressing concern. If businesses are putting employment decisions on hold, they should use this time to take stock of the skills, technology and working practices needed to move their businesses forward in the long-term, regardless of what the EU decision is.
“Employers need to be constantly seeking marginal productivity gains and avoiding the tendency to only focus on productivity improvements every few years. They can do this by improving the quality of leadership and management, up-skilling existing staff and redesigning jobs to enable people to work smarter rather than harder, and for longer.
“The mood of caution amongst employers is mirrored by the slow-down of average total earnings growth. Poor productivity growth and the introduction of various labour costs such as the National Living Wage and the rolling-out of the government’s auto-enrolment pension scheme may account for the fall in total pay to 1.8%. As the CIPD warned earlier this year, productivity improvements are essential to making policy interventions such as the National Living Wage affordable for employers; and there is no sign yet of a pick-up in the UK’s productivity performance. It’s no surprise therefore to see that employers are cutting back on other areas of the wage bill, such as overtime and bonuses. This phenomenon also explains why there is still no sign of a pick-up in basic pay growth, despite official forecasts suggesting there would be.”