Employment in the UK has hit a record high. Almost 76% of the population aged between 16-64 is in work according to data released last month. And full employment is beginning to be reflected in pay packets. Average wages rose 3.4% year on year in November after increases of 3.3% YoY in October, and 3.1% YoY in September. This is the first time since the start of the financial crisis over ten years ago, that wages have risen by more than 3% in three consecutive months.
Wage pressures seem to be building. Confirmed by a financial controller surveyed “Salaries are creeping up, and companies are mindful of trying to keep good people.”
However 53% of those questioned by Reed Accountancy & Finance said that finance salaries are increasing by just 0-2% pa. That is extraordinary, given the economy started recovering in 2010 – we are now in our ninth year of (albeit sluggish) economic expansion. Only 10% of those questioned said that salaries were rising by more than 4%. For historical perspective, in the three years before the crisis (2004-07) average wages rose between 4-6% each and every year.
The survey also suggests the finance industry has mixed opinions on whether paying up is the only way to attract candidates with the required skills. Questioned, half said salaries needed to be increased to hire the right people and half said it wasn’t necessary.
“People leaving for more money is rife within the industry” – Finance Manager. It also seems qualifications are financially rewarded - 40% of firms questioned would be willing to pay a higher salary for a formal accounting qualification. “As employees are achieving qualifications, their salaries are increasing.” – Sandra Tyler, Head of Human Resources, White Light Ltd.
The survey does suggest a couple of reasons why wage growth is still muted, despite record employment.
Over 60% of those questioned say there has been a decrease in the number of employees leaving in search of a higher salary elsewhere. This is extraordinary because normally when workers are in short supply, as they are now, moving jobs is an easy way to increase pay.
But uncertainty over Brexit seems to be persuading staff to stay in their current jobs because of job security - confirmed by a number of those questioned in the survey. If the economy slows in the future, then it is safer to be employed at a firm where you have been for years. Last In First Out is not just an accounting inventory principle, but also tends to apply to redundancies.
Despite this unwillingness to move, 55% of employers questioned have increased salaries to retain key staff. And that has led a few to ponder on the need for more training and career progression.
“I now realise that we need to be training people ourselves and ensuring we pay them the going rate.” Clare Jady, Partner, Hull Jady.
When people leave it tends to be for a job closer to home or career progression, rather than just a salary increase
Alan Lomas, Finance Director, Procure Plus
And that comment from Mr Lomas brings us to the second factor that may be holding wages down - employees’ desire for a work life balance. Many questioned said this was just as important as salary. Things like flexible working, limiting working hours and a good commute are all important to attract and keep key employees: “We tend to retain our staff with salary and benefits and work life balance” – Bal Desai, HR Manager, Wilder Coe.
We have spent more time developing the benefits package so salaries are not now the be all and end all
Melody Horncastle, Recruitment Manager, Cyannode
Over the last few decades, there has been a huge surge in interest in flexible working opportunities. And on a personal note, as a working mother of two, flexible working is the key reason I choose to work as a freelance broadcaster and writer – I can juggle it with the commitments to my family. I can take my daughter to football practice on Thursday evening, my son to swimming on Monday night and my 80 year old Mum to hospital if she needs to go.
So in summary, there has recently been an uptick in wages, but it’s been muted so far thanks in part, to Brexit fears and societal changes. But although society has changed forever at some stage Brexit will end. And that has led many businesses to worry about recruitment once immigration is curtailed. That really could kick start wage inflation (provided the economy hasn’t collapsed beforehand).