Human Resources

3 Top Insights from the CIPD Labour Market Outlook



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Each quarter, the CIPD releases a Labour Market Outlook Report which seeks to assess the current market for employers and employees alike.

They poll over 1000 employers across a range of industries to get a full view of competition for candidates, salary, recruitment, and redundancies. 

As an HR practitioner, understanding the current labour market can help you to create attractive opportunities for new members of staff and tackle challenges that may be causing existing staff to leave.

We’ve picked out 3 top insights from this report, so you can gain an overview of the information and use it to make worthwhile change in your organisation.




More Employers Seek to Increase Their Headcount

The net employment scoring system was created to measure opportunities for employment by calculating the difference between employers looking to increase their headcount and those that believe their headcount will remain the same.

This has risen from +18 to +22, meaning a larger proportion of employers are looking to increase their staffing levels. There was a positive trend across all industries, with the biggest increases in construction and the public sector.

This means that recruiting may become more difficult over the coming months. With a lot of competition for talent, candidates can choose from the employers that they feel offer the best overall compensation. This doesn’t just mean salary; candidates will also consider holiday allowance, working environment, flexible working options, and other perks.

If your organisation offers a basic compensation package, around the market rate but with no frills, then they may not be able to hire the best candidates. If you want to encourage your organisation to offer a better compensation package, then you must make a business case for doing so.

Show the C-suite where money is being lost, whether it's from high employee turnover, staff shortages, rising recruitment and training costs, or disengaged employees with low productivity rates.

Reputation also matters when the labour market is difficult for employers and a few bad reviews on the likes of Glassdoor can be enough to dissuade a candidate from applying.

To tackle this, focus on the employee experience and take the word of past employees seriously. Respond to these online reviews and use exit interviews to diagnose where problems exist in the organisation.




Organisations Face Difficulties in Filling Roles

Of the organisations surveyed with open vacancies, 67% stated that they had hard-to-fill vacancies. This trend was higher in healthcare and public administration, with 75% and 71% of employers struggling to fill open roles, respectively.

These were self-reported by the organisation as difficult to fill for several reasons such as niche skillsets and high competition for candidates.

Comparing this with the previous year, 43% of employers stated that they felt it had become more difficult to fill vacancies in the past 12 months. Just 5% of those surveyed felt that filling vacancies had become easier over the same time period.

As well as enhancing the organisation’s employer branding with better compensation and reputation management, there are other tactics that you can use to reduce the difficulties in filling these roles.

One such tactic is to train and upskill existing employees instead of recruiting outside talent. This can elevate lower-level employees to senior roles, leaving a lesser challenge in recruiting for lower-level support roles.

This also increases employee engagement and reduces staff turnover, as employees feel that they have further opportunities to progress within the organisation.

Retention is key for organisations, and not only during competitive times in the labour market. Improving the employee experience can significantly reduce the costs and difficulties associated with recruitment.

When seeking new members of staff, consider whether your open job descriptions are detailed and attractive enough for candidates to want to apply. Job descriptions that are vague or misleading won’t lead to successful hires.

Crafting a great job description isn’t just a matter of copying a previous advert; you have to create a great first impression and quickly show candidates why they should apply.




The Labour Market’s Impact on Salary

Unsurprisingly, increased competition for candidates within the labour market has an impact on the salaries offered. 86% of employers plan to review pay rates within the next year, and 48% believe that their basic pay rates will rise during these reviews.

70% of private sector organisations and 41% of public sector organisations will do so as a response to difficulties with staff retention. Other reasons for increasing pay included inflation, increasing market rates, recruitment issues, and pressure from unions or members of staff. 

41% of employers stated that they would increase pay settlements by between 2% and 2.9%. 34% of employers intend to increase basic pay settlements by more than 3% in the coming year.

This shows that you must be aware of the market rate for workers in your sector. If a competitor offers your employees a 4% higher basic salary than your organisation, there’s little incentive for them to stay with your organisation. If they also offer a better overall compensation package, then it’s a no-brainer for your members of staff to leave.

This is further compounded by economic insecurity due to Brexit. The value of the pound and rising living costs has created uncertainty for many members of staff, especially among EU nationals working in the UK.

Reviewing salaries regularly is essential to ensure that your organisation is competitive. Organisations that don’t adjust for inflation or review their salaries against the market rate face significant staffing difficulties.

Being able to offer security to your colleagues is also important. Offering fair contracts and regular hours will make your staff much more likely to remain in their roles for longer. Give them flexibility where required too; this doesn’t cost the organisation anything in terms of salary but is hugely valuable to the individual employee.   




Understanding the challenges faced by your organisation in the current labour market allows you to become a more strategic partner within the business. You can anticipate upcoming changes and take steps to ensure that your organisation has the best people to help it thrive.


Become a more strategic partner in your organisation by studying a CIPD qualification online.


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