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In the wake of last week’s budget and the chancellor warning that the UK is already in recession, we examine how employers can address the anticipated slowing of the labour market.

As hard-pressed employers are struggling to grant pay rises that match the cost of living, we outline strategies to overcome recruitment and retention challenges that will accompany the forecast two-year recession.

Levelling off after the recruitment boom

Firms may particularly face rising recruitment challenges as there was a sharp fall in new job advertisements in mid-October. The summer of 2022 saw a buoyant labour market that many were describing as an employer’s market. With forecasts of household incomes reducing by seven per cent in the next few years as the cost of living eats into people’s wages and the government expecting the number of people unemployed to rise by over 500,000, job security is already being reflected in reduced turnover forecasts by respondents in our autumn 2022 UK Reward Management Survey.

79 per cent of employers anticipate upcoming recruitment challenges in the next 6 months."

During the pandemic, we captured the lowest levels of recruitment challenges since the 2008 recession. However, our autumn 2022 survey captures a return to pre-pandemic levels of challenges facing employers looking for top candidates. In the last six months, 86 per cent of respondents have had difficulty recruiting people. 79 per cent of employers anticipate upcoming recruitment challenges in the next 6 months. Similarly, 77 per cent report difficulty in retaining people as talent shortages persist, showing the renewed war for talent seen before the pandemic.

Young woman working from home

1. Strengthen your employee value proposition

The CIPD defines an organisation’s employee value proposition as ‘what an organisation stands for, requires and offers as an employer.’ Often described as a psychological contract between the employer and employee, it is the expectations, beliefs and obligations of the employment relationship. By communicating this internally, the perceived value amongst employees of working for the organisation can be strengthened, fostering pride and purpose. This can then be reflected externally on literature aimed at candidates and on social media channels to capture the culture of the organisation.

With 75 per cent of employers making greater use of technology to recruit and retain according to our UK Reward Management Survey, organically advertising the culture of the business though social media can bolster this awareness and attract the right candidate. 73 per cent of respondents also said that they will analyse the results of exit interviews, so asking questions to identify the strength of the current employer brand can be one way of stress testing the effectiveness of the existing strategy. This can help to more accurately target your messaging around what you want to be known for.

2. Prepare a pipeline of future leaders

Your pipeline of talent is crucial, particularly as recruitment and retention challenges have ebbed and flowed over the ten years that we have been running our UK Reward Management Survey. When considering succession and developing leaders of the future, performance management is key. Business leaders required to drive the organisation forward can be fostered from the beginning of their employee journey.

Often employees are promoted based on performance, meaning many reach management level without these distinct skillsets being fully supported up until the point they are needed. Therefore, having leadership training available regardless of seniority, equipping people for future roles, is one way in which leadership can be secured for the future. Investment in skills and talent development for the future is at risk given constrained budgets, but this is critical to safeguarding business agility.

3. Consider a long-term reward framework

How you recruit and attract new candidates can impact the overall reward framework of your organisation. One in eight employers are offering golden handshakes to entice new joiners; with two thirds of adults worried about their finances now, compared to one third during the pandemic, this can prove a valuable tool. However, 67 per cent of respondents to our UK Reward Management Survey said that they will focus on communicating the wider reward package more clearly, highlighting how demonstrating the full investment made by the employer in each employee will be important in times of constrained pay. Many employers are making greater use of Total Reward Statements that outline this in full.

Our UK Reward Management Survey revealed that 71 per cent offered new recruits salaries that conflicted with those paid to existing employees in autumn 2022, an increase from 57 per cent in autumn 2021. This may reflect how those currently moving are looking for greater financial reassurance to make the move from stable roles. 65 per cent have offered up to 10 per cent more than paid to current employees, whilst 32 per cent have offered up to 20 per cent more; this runs the risk of creating pay parity issues within the organisation and de-motivating loyal employees.

two female creatives discussing magazine layout

4. Build and nurture key skills within your organisation

The budget faced criticism from the Institute of Directors’ Kitty Ussher who said that the skills shortages across the economy remain unaddressed in government policy. There has been some plans laid out for the NHS, but developing tech roles are hard to fill.

“We are calling on government to establish an independent Shortage Occupations Agency to advise on a granular list of priority skills and to be bolder in what it will do to achieve change, including incentivising organisations to train up their staff to meet national skills shortage needs.”

Kitty Ussher, Institute of Directors

The adult skills shortages means that certain roles are particularly challenging to fill for employers. The shortage of key skills is exacerbated in certain sectors, making it particularly hard to attract and retain the right talent, namely care, renewables, tech and construction. Having a designated skills programme within an organisation can help keep the organisation agile and able to weather periods of economic instability where the labour market slows.

5. Ensure you are fostering diversity

Working age benefits will rise in keeping with inflation, which is crucial to supporting greater activity in the demographic of 50-64 year olds who need greater financial security following the pandemic and the cost of living crisis. Employers can make the most of skills and experience gained by over-50s throughout their years of experience. The pandemic has also adversely affected women, who are more likely to step back from work given the rising costs of childcare as more employers call for a return to the office, and those of ethnic minority backgrounds who studies find have been hit hardest by the cost of living crisis.

Anecdotally, we are hearing from customers in HR Groups that whilst benchmarking is helping to maintain competitive pay, employers are increasingly reviewing whether their policies are family-friendly to attract and retain top talent. By looking at individuals’ priorities holistically, this approach is a more attractive proposition for candidates who have become used to having greater flexibility through working from home over the pandemic and balancing this with other responsibilities. By focusing on what individual employees require, many employers are able to access under-represented demographics in the workplace and tap into valuable talent pools.

Get in touch

Are you struggling to put in place a plan to help you recruit and retain the talent you need? Call us for an informal chat through your options and how you can identify any particular areas of recruitment and retention challenges within the business. We can help you plan your approach to various policies that can strengthen your employee value proposition and deliver your firm’s vision – get in touch today.

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