Recruitment difficulties to endure in 2005

2005

Overall levels of employment in Britain look set to rise during the first quarter of 2005, but the rate of increase is expected to slow slightly.

The latest quarterly survey of HR trends and indicators by the Chartered Institute of Personnel and Development (CIPD) has found that fewer than half (45 per cent) of employers expect to recruit a net number of additional staff in the first quarter.

The number of employers planning redundancies due to a lack of demand for their products or services (13 per cent) or a reduction in budgets (13.5 per cent) is also higher than in recent quarters, implying a slight slowing of the economy and consequent easing of pressure on the labour market in early 2005.

However the survey of over 1,300 employers, between them employing nearly 1.3 million people in the UK, also suggests that labour market pressures are far from disappearing.

Over half (55 per cent) of employers anticipate ongoing recruitment difficulties in the coming quarter. In the longer term, too, employers see no major tail off in employment, with a net 17 per cent of employers expecting to employ more staff than they do now by this time next year.

Lack of specialist skills and experience were the main reasons given for recruitment difficulties, with more than four out of 10 employers saying that they had received no applications at all for some vacancies.

The survey also highlights a growing split between public and private sector recruitment intentions. A net quarter of all private sector employers expect to be employing more people in one year’s time. However, the net figure for public sector employers expecting to employ more staff is zero.

In other words the proportion of public sector employers expecting to employ more staff by the end of 2005 is entirely offset by those expecting to employ fewer. This is likely to reflect the view of public sector employers on the likely impact of the Government’s plan to cut civil service and other back-office jobs - following the Gershon efficiency review published last year - while at the same time hiring more front-line workers.

Encouragingly for the overall economy, ongoing labour market pressures are still showing no sign of fuelling inflationary pay increases. One in four employers expect pay to remain stable or rise by less than two per cent, and fewer than five per cent of employers expect increases to exceed four per cent. The vast majority (68 per cent) expect pay increases to average between two per cent and four per cent.

Dr John Philpott, CIPD Chief Economist, said that the tight labour market was creating real difficulties for employers seeking to recruit new employees and retain existing ones.

"With pay restraint seemingly remaining the norm, employers are investing more time and effort in improving recruitment efforts. Many are also paying greater attention to work-life balance and family friendly policies in order to attract new staff, and retain and motivate the existing workforce.

"With the outlook for wage inflation seemingly benign, despite a tight labour market, the survey adds weight to the view that interest rates have peaked."

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