Skills shortages creating pay inflation ‘crisis’: legal and finance sectors worst hit
As the UK’s skills crisis intensifies, some employers are battling pay inflation demands of over 37%, adding to the financial strain that businesses are already facing. That’s according to new research by specialist recruitment firm Robert Half.
The firm’s 2024 Salary Guide – which analyses and reports on market salaries, hiring trends, and skills requirements across the UK – revealed that almost a third (32%) of employers are finding themselves in the middle of a wage spiral, having to inflate salaries to maintain a competitive edge in the war for talent. A further 26% of companies are offering additional one-off bonuses to keep hold of their staff.
While over a quarter (27%) of firms are planning pay increases in line with inflation, those looking to recruit in skills short markets are facing potentially budget-breaking salary increase demands. Some of the roles where pay inflation has spiked significantly are:
Insufficient salary is the most common reason for rejecting a job offer. With 63% of workers ready to decline a new opportunity because the salary doesn’t suit, many hirers have little opportunity but to meet skilled employees’ increasing demands.
Matt Weston, senior managing director UK & Ireland, at Robert Half, commented: “Many employers may be shocked next year at the salaries that some of their most in demand roles will command. Without careful planning this will weigh heavily on company profitability at a time when businesses are struggling with costs.
“It is no surprise to see financial incentives are perceived to be a top solution. However, continuous pay rises aren’t sustainable and firms need to consider how else they can boost hiring prospects and reduce attrition. With the UK continuing to face significant skills shortages and 75% of employers concerned about the attraction and retention of staff in 2024 according to our research, firms will find themselves with little option but to listen to the employee voice.
“Yet, pay is not the ‘be-all and end-all’. A robust corporate culture and a tailored retention programme can be a cost friendly strategy. Our research shows, for example, that almost half (47%) of the workforce would reject a new job if the company didn’t offer flexible working, yet news reports continue to highlight brands that are enforcing office returns. And in many instances employees leaving a business do so due to deep-rooted talent attrition causes such as heavy workloads and a lack of development opportunities. Business leaders must address all aspects of the employee experience and must do so fast, since an increase in pay is the inevitable by-product of ‘jumping ship’.”
