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Following a buoyant labour market as Covid-19 restrictions were lifted, employers are seeing employee turnover levels plateau once again. However, they remain above pre-pandemic levels.

Here we explore market trends and how employers are overcoming challenging market conditions to attract and retain key talent.

Employee turnover figures echo uncertain times

During the pandemic, our UK Reward Management Surveys captured the lowest levels of reported recruitment and retention challenges since the 2008 economic recession. Job security and rising costs for both employees and employers has had a chilling effect on the highest vacancy levels in 20 years, captured in October 2021.

In spring 2021, our UK Reward Survey captured turnover statistics that showed just seven per cent turnover was expected across all employees, with five per cent turnover in junior roles outside of management positions. This increased to 13 per cent for all employees and 10 per cent for junior employees in spring 2022. Preliminary autumn 2022 figures show a slight increase to 14 per cent for all employees, with turnover in junior members maintaining at 10 per cent.

When it comes to predictions about employee turnover, employers are being the most cautious we have seen in the last two years. In spring 2021, turnover was expected to increase for all employees by 35 per cent and 31 per cent for more junior roles; this increased to 44 per cent in spring 2022 and 46 per cent for more junior roles. Junior roles continue to show higher turnover than middle managers and leaders. Preliminary results for autumn 2022 suggest a more positive outlook, at 25 per cent for all employees and 30 per cent for more junior roles.

While this suggests turnover is slowing, the labour market remains competitive as ever, with one in three junior staff set to leave. Employers have to look at the trends of their workforce attrition and the roles they are predominantly struggling to fill, which will help them identify how to target reward actions to attract and retain talent.

Recruitment and retention hurdles

Employers face the challenge of addressing the pressures employees face from the Cost of Living crisis and balancing this with inflationary pressures. This is whilst they recover in the wake of the pandemic and grapple with the ongoing effect of Brexit.

There is growing concern over the UK’s skills gap. According to research by private equity firm ECI Partners, ‘The Next Generation of Hiring’, a lack of technical skills and knowledge is the biggest hiring obstacle for HR. The skills gap has been exacerbated by factors such as Brexit and Covid-19, as the pressures on individuals have led to many leaving certain sectors, particularly in care and hospitality.

With sectors such as healthcare, where a number of roles sit at National Minimum Wage level, organisations are competing with potentially higher levels of pay outside of the sector. Wider market pressures make transferrable skills harder to retain.

Renewable energy and construction sectors are also experiencing elevated recruitment and retention challenges. Highly skilled, competitive markets are struggling with a smaller talent pool, making the approach to total reward - from pay to internal culture – critical to their operation.

For other sectors, market conditions are particularly impacting the operation of their premises in the UK. Energy prices are rapidly rising for businesses, with many considering how to retain staff and balance this with affordability. Businesses are looking to support plans to be unveiled by the new Prime Minister that may ease the pressure.

Rising salaries create great expectations

With inflation currently sitting at 10.1 per cent, employers are under increasing pressure to offer meaningful reward to employees.

Salary expectations is another key hurdle identified by HR managers, pivotal to the success of attracting and retaining people.  With inflation currently sitting at 10.1 per cent, employers are under increasing pressure to offer meaningful reward to employees.

With widespread strike action being instigated by pay negotiations from the Royal Mail to rail workers, firefighters and control room staff, many employees are protesting that they are experiencing a real pay cut. Our UK Reward Management Survey captured three per cent pay rises being awarded in spring 2022, which clearly falls below official inflation figures.

Many organisations are considering what they can do to balance affordability against the desire to support and ease the market pressures facing employees. Benchmarking can ensure salaries can remain competitive with the sector and wider market.

Others are incorporating second pay reviews for 2022 to help people meet their costs of living or bringing forward their pay reviews. As employers try to keep pace with competition in the next six months, many are hesitant to set a precedent of higher pay awards, so staggered pay reviews can help manage pay budgets.

woman and man discussing over a laptop

What else can businesses do?

Businesses are also considering weathering the storm by investing in upskilling their available workforce. The 2008 recession saw widespread redundancies, but the response to the pandemic was more about getting through the unprecedented times together. With fewer employers reportedly relying on academic success as a marker for future roles, skills-based hiring is on the rise as employers look for potential and look to up-skill existing workforces.

Many employers are reviewing their recruitment processes to drive greater success in attracting the right skills. Onboarding is seen as a critical tool to set the right tone from the outset of the employer and employee relationship, embedding the company culture from day one and avoiding high staff turnover. Equally, the recruitment process itself and how efficient this is can also drive engagement from the moment the candidate applies.

Quiet quitting’, where employees become disengaged from work, has recently been widely discussed as a concept, introduced by social media. Achieving engagement from the outset through a positive onboarding experience followed by effective internal communications can help individuals achieve greater work-life balance while feeling engaged.

Building the right culture is critical. The pandemic gave more people the opportunity to work from home. A study by Aviva suggests that as a result, priorities may have shifted for many, with 41 per cent attracted to their current role because of the work-life balance it offers, compared to 36 per cent who valued salary more. In 2019, 41.02 per cent of employees valued salary more, compared to 40.97 per cent valuing work-life balance.

Companies are increasingly looking at how they can support employees as individuals, with greater support offered via leave policies which now encompass menopause and fertility treatments. Fostering a sense of belonging and inclusion is a cornerstone for company culture that is a priority for many employers, driving engagement and productivity at work for people.

Get in touch

As economic uncertainty continues to impact all aspects of business, contact us to discuss how we can help you ensure your approach to reward is competitive. We will assist you with benchmarking your pay levels and consider your wider approach to engage employees to help you win and keep the talent you need.

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