For candidates with desirable skills, now is a great time to change jobs. Companies are in fierce competition to secure candidates with skills that are in short supply. This means that, as a result of offers and counter-offers on starting salaries, companies are having to increase offers on starting salaries by an average of £3,400 each time. (pg.10 of The OU Business Barometer)
It is at this point I must stress to any candidates reading this that salary inflation has not applied to all areas of industry.
Where exactly the skills shortage sits can be confusing. It varies depending on which source you read. Furthermore, there is a clear distinction between Occupation shortages and skills shortages within workplaces in general.
The Government website includes a list of occupations where there is a shortage of qualified workers. These occupations include various engineering roles, medical roles, Aerospace professionals and so on.
However, I’d like to focus on skills shortages and skills gaps which are causing salary inflation.
Let’s first distinguish between the candidate shortage, the skills shortage, and a skills gap.
A skills gap is defined as occurring when ‘an organisation’s employees do not have enough skills to meet the organisation’s objectives’ (pg.17, Edge Skills Shortage Bulletin)
It is to be expected then, that when a business is unable to meet its objectives with its existing workforce, it will look at which measures it needs to take in order to fulfill them. Such measures might include; modifying the objectives, training existing staff or recruiting externally.
The skills shortage kicks in as a definition when employers look to recruit externally. It is defined as occurring when ‘an employer cannot recruit workers from the open labour market with the required skills’. ( pg.17 Edge Skills Shortage Bulletin)
Which Skills Are In Short Supply?
According to a report by The Open University (pg.9) companies are having trouble finding candidates with the right levels of managerial, leadership, technical and operational, IT, industry-specific and soft skills. That’s quite a list. Perhaps more tellingly, this is costing UK businesses £6.3 billion a year. This is in training, salary inflation, recruitment, and temporary hiring costs. (pg.10)
These factors affect the whole of the UK. However, salary inflation and a rise in temporary wages are most prolific in London. According to the KPMG and REC UK report on Jobs, it reached a 53-month peak.
How Are Businesses Coping?
It is surprising then that, so few businesses are utilizing their training options. According to the OU report, 52% of employers feel they will need to hire a candidate with skills lower than required, 62% think they need to increase salaries on offer and 61% think they will have to spend more on recruitment. If they do this without utilizing their training levies to upskill their existing workforce, they stand to spend more and effectively lose money by ignoring their levy pots. This could be resolved by factoring training times into the timeframes for business objectives.
Is The Approach Consistent with Candidate Expectations?
In my view, this makes very little sense. As a recruiter, I will always welcome more business. However, I have a responsibility to offer my clients the best service possible. This includes being honest when the calibre of candidate they require is simply beyond their reach on the open labour market.
The fact is, an inflated salary might secure a candidate for some time. However, the likelihood that it will be enough to keep the candidate in the role long term is not great. Candidates will often stay with a company when that company aligns to their values.
That’s not to say that there are not candidates who are determined that the highest possible salary offer is the deciding factor in accepting an offer. But the research suggests that they are by no means a majority.
What Are Candidates Looking For?
I have spoken to a number of candidates who are concerned that an inflated salary offer will negatively impact their careers by pricing them out of the jobs market and by hindering their development. Furthermore, a recent survey published by Aon showed that candidates now look at a company’s benefits package as being as important as the salary. Candidates now expect companies to offer flexible hours, the option to work from home when needed, employer awareness of mental health issues, diversity and inclusion and improved parental leave.
This view is consistent with the feedback I’ve been getting from some candidates looking to register with us. One of the most common questions I’m asked after the salary is whether the company offers any flexibility in working hours/working from home.
It is also surprising how many managerial level applicants inquire about training and development opportunities.
What is clear is that there needs to be an urgent shift towards a double-pronged approach; upskilling existing staff as well as offering attractive working benefits to new and existing staff alike.