The latest Robert Half Jobs Confidence Index (JCI), produced in collaboration with the Centre for Economics and Business Research (Cebr), reveals a shift in UK pay inflation trends.
Workers are expecting an average pay rise of 3.8% over the next year, which is lower than the 4.6% that employers plan to offer. This discrepancy suggests businesses are preparing to address ongoing skills shortages.
According to the JCI, the disparity between employee expectations and employer forecasts reflects the business sector’s response to the scarcity of specialised talent. Survey data from the Bank of England indicates that employers anticipate having to offer higher salaries to attract and retain skilled workers. Those expecting a pay rise predict an increase of 5.1%, particularly in sectors experiencing severe skills shortages. Additionally, employees with degrees expect a 4.4% pay rise, compared to 2.8% for those without.
Stability and Security in the Workforce
Despite the decline in the number of workers expecting a pay rise, a significant majority (65%) still anticipate a salary increase in the next 12 months. This data suggests that job security and stability are becoming more important to employees amid economic uncertainty.
The JCI data shows that a quarter (25%) of employees would remain with their current employer even if their remuneration packages did not change. While 20% would consider changing employers for better pay, many are looking for alternative ways to cope with the economic climate. Over 16% of employees would cut spending on non-essentials if they did not receive a pay rise, 13% would seek additional income sources such as a side hustle, and 7% would consider relocating to areas with lower living costs.
Employer Challenges in a Changing Market
Matt Weston, Senior Managing Director UK & Ireland at Robert Half, commented on the findings: “Wage inflation hasn’t fallen as expected, but the cost-of-living crisis remains a significant issue for workers in the UK. Many employees are hoping for pay rises, but the market’s uncertainty means that a more realistic approach is being taken by many.”
Weston also highlighted a trend he describes as the “Great Stay,” where workers are prioritising job security over the potential for higher pay elsewhere. “This trend is both positive and negative for employers. It aids retention but also reduces the available talent pool. Employers will need to work harder to attract and retain core staff, and simply offering higher pay may not be sufficient.”
Addressing the Skills Shortage
Employers are acutely aware of the skills shortages affecting various sectors. This has prompted businesses to budget for higher salaries to secure the necessary talent. However, the challenge extends beyond remuneration. Employers must also focus on creating an attractive work environment and offering opportunities for career development to retain employees.
The JCI data indicates that while employees are adjusting their expectations, the demand for specialist talent remains high. Businesses must balance competitive salaries with other retention strategies to maintain a skilled and motivated workforce.
Navigating the Future of Work
The evolving economic landscape and the ongoing skills shortage present significant challenges for both employers and employees. As businesses adjust their salary expectations to attract talent, workers are increasingly prioritising stability and security in their careers. This shift underscores the importance of a balanced approach to compensation and employee retention.
The Robert Half Jobs Confidence Index provides valuable insights into these trends, helping businesses navigate the complexities of the current labour market and inflation. By understanding the changing expectations and motivations of the workforce, employers can better position themselves to attract and retain the talent they need to thrive.
