Wage inflation continues to spiral:
Salaries have continued to rise throughout 2022, and have not peaked just yet
Employers are under increasing pressure to increase pay to match the UK’s overall inflation
rate which is currently at a 50-year high of 9.1% and is forecast to run up to 11% later this
year. Initiatives include one-off bonus payments and more frequent salary reviews. RollsRoyce confirmed it would offer a one-off £2,000 payment to 14,000 of its staff, alongside
a 4% pay increase, whilst Lloyd’s Bank also confirmed a £1,000 bonus to its 64,000
employees earlier this year.
The UK Government is adamant on its high growth, high wage economic plan, yet earnings
after inflation are barely any higher today than they were in 2008. Grievances have been
made visible with recent high-profile strikes from the railways, TFL and British Airways.
Yet, due to the fragmented nature of jobs, sectors and skillsets, and factoring in demand
and negotiations ONS’ wage inflation figures do not always reflect what is happening on
the ground. Despite the national wage inflation figure being 6.8%, many in demand roles
are seeing salaries swell by 15-30%. Resource Solutions’ data has seen the average salary
of placements made rise by 29% between 2021 and 2022, recovering from the -7.6% drop
seen between 2020 and 2021.
Talent supply is the answer to suppressing runaway wage inflation. Greater supply will
naturally stifle the rate of inflation. However, ironically, higher wages will help to create that
supply of workers’ by attracting more people into the workforce.
Four day working week?
World’s largest trial of a new working pattern has begun in the UK
More than 3,300 workers at 70 UK companies started working a four-day week in June, with
no loss of pay. This is the world’s biggest trial of a new working pattern. The trial is based on
the 100:80:100 model, 100% of pay for 80% of the time, in exchange for a commitment to
maintain 100% productivity.
Currently, the average working week for full-time workers in the UK is only 36.3 hours.
This is on a par with the European average, but much less than other nations, such as
China, where the figure is 41.7 hours, or Singapore, at 44.8. However, these averages do
not reflect how work has become more tantamount with personal lives, as weekends and
evenings become less safeguarded due to the flexibility of working from home.
Previous experiments at reducing the working week have proved successful. Last year
Iceland cut the working week of thousands of staff from 40 hours a week to 35 or 36
without a reduction in output. In 1926, Henry Ford cut the working week of his staff from six
days to five, with no loss of pay, a decision which proved to be revolutionary as production
did not subside. Ford had said “the pressure will bring better methods” and this could be
the case in the UK, with a shorter working week, automation, scalability, and productivity
will all be pushed to the fore.
The pilot is running for six months and is being organised by 4 Day Week Global in
partnership with the thinktank Autonomy, the 4 Day Week Campaign, and researchers at
Cambridge University, Oxford University and Boston College.
How to address current skills shortages:
Internal mobility, apprenticeships and training more important than ever
Given the difficulties faced when sourcing talent externally, employers are looking
introspectively, sourcing talent from within the business. According to LinkedIn’s Global
Talent Trends report, firms that offer internal mobility opportunities are 41% more likely to
retain employees than those that do not. The report also estimates that an internal hire has
the potential to save upwards of £50,000 when compared to an external one.
Apprenticeships have grown in importance amongst employers, offering a low-cost method
to hiring talent at all levels of education to grow into a role and ultimately plug any skills
gaps. Amazon has announced the creation of 1,500 apprenticeships in the UK in 2022 and
may other employers will follow suit to mould the right people into their roles.
Lastly, a culture of constant development is crucial for existing employees. Training,
reskilling and upskilling are all essential to ensure employees keep pace with the changes
happening within technology, business processes and global trends. Training opportunities
need to be equal, as currently, non-managerial staff, who make up the majority of
headcounts are least likely to be offered digital skills or reskilling, which would help
them progress in their careers. A learning environment will also help improve employee
confidence; HR firm Bersin found that employees with a strong learning culture are 37%
more productive.
Trends in brief:
• Studies have shown UK employees are working harder than ever before. A UK
government survey found 46% of workers strongly agrees that they work ‘very hard’. Up
from 30% of employees when asked the same question in 1992. (YouGov)
• As of June, the UK has welcomed 65,700 Ukrainian refugees, with some now in
employment. (Home Office)
• Skills shortages continue to be prominent within the UK’s labour market, A British
Chambers of Commerce (BCC) survey found that 86% of employers are struggling with
talent acquisition. The shortage of candidates has had a knock-on effect on workloads
and wellbeing at work. (British Chambers of Commerce)
• The number of contractors within the UK is at a six-year high. There were a recorded 1.7
million contractors within the labour market as of December 2021, this is around the
same level as 2015, with many permanent workers now opting for lucrative day rates
and flexible working. (ONS)
• Within the UK, there are 25% less commuters than in February 2020. This is the
largest drop in office-based workers within Europe. The UK also recorded the highest
percentage of employees who said they would consider quitting their current role if
forced back to the workplace full-time. (WFH Research)
• Cracks are beginning to show within the gig economy. Employers are struggling to be
profitable after high-profile rulings over the past few years require some start-ups to
owe employees the minimum wage, holiday pay and pension contributions. This has
hit a sector which is already accustomed to making a loss. Shares in listed companies
such as Uber, Lyft and Deliveroo have all dropped sharply this year, reflecting these
workforce challenges.
• Amid worker shortages, employers are loosening job requirements. Some vacancies in
the US now state “Applicants with criminal histories are welcome to apply.” In the UK, to
fill vacancies quickly employers are taking on people who might only meet 60% of a job
description, then training them over the next three to six months. (Financial Times)
• Ninety-seven FTSE 100 companies have committed to scheme to improve diversity, but
only six CEOs are from BAME background (Parker Review)
Ref: RSIntelligence
