As the fight for talent reaches boiling point, Michael Barrington-Hibbert, founder and CEO of Barrington Hibbert Associates, explores the challenges facing recruiters in an inflationary environment, along with possible solutions.
A nationwide skills shortage is threatening the financial services industry. According to the Office for National Statistics (ONS), 69 per cent of employers are now experiencing skills shortages of some sort. The most recent ONS employment figures suggests that this issue is only getting worse, as unemployment decreased 0.2 per cent on the quarter to 3.6 per cent, the lowest rate in over 55 years.
In one of the tightest labour markets in modern history, over 90 per cent of UK employers have struggled to fill job roles in the past year. Workers now hold the keys of choice, as organisations struggle to hire and retain staff in a competitive jobs market set to boil over into 2023.
Firms across the country will be in a cost-saving war over the next financial year, and with increasing overheads putting the squeeze on businesses’ bottom lines, they will naturally be wondering if growth is sustainable, or even possible.
To win the battle for talent, it will be vital for businesses to remain a step ahead of their competitors by recruiting and retaining the most skilled workers.
Recently, the Recruitment and Employment Confederation (REC) showed UK hiring and pay growth at its weakest for over a year. Inflation-adjusted wages fell by 2.6 per cent, putting additional pressure on workers already feeling the ramifications of a cost-of-living crisis set to hike energy prices by up to 80 per cent.
Businesses from sectors such as technology have implemented salary rises to mitigate the cost of inflation. According to hackajob, 46 per cent of candidates turned down offers because they had accepted other roles, and tech workers in Scotland have seen their average salary jump to £80,000.
The demand for recruitment has even triggered profit warnings from large UK listed companies, which have surged by 58 per cent as hits from rising costs, supply chain issues and staff shortages continue to dent quarterly earnings. Coupled with a sharp drop in M&A activity, it’s becoming doubtful whether businesses will hit their revenue and earnings estimates, as they look to plug the gaps in their workforce. In the lead up to 2023, it is more important than ever to attract talent by treating employees’ shifting needs as a business investment amid market turmoil.
The Changing Workforce Market
During COVID, people changed careers, and altered working habits resulted in employees rejecting major city commutes. Greater prioritising of personal wellbeing above all else has ultimately resulted in a geographically broadened workforce. Inflation rates have also seen travel and overhead costs rise out of line with wage increases. The cost-of-living crisis is now forcing workers to reevaluate their role in the workplace.
Over 90 per cent of adults reported their cost-of-living increasing year-on-year, with food and energy prices rising over 10 per cent in comparison to 12 months ago. Forward thinking organisations will have to make accommodating the needs of employees through tough economic conditions top of their agenda.
Employees are wanting more from their employer than just the social contract of work. Organisations should be implementing strategic workforce planning and changing corporate benefit packages to reflect the world of work today. Instead of on-site specific perks such as gym memberships, pet-friendly office days and drinks, employees value childcare benefits such as additional annual leave, increased paternity leave, flexible work-from-anywhere policies, and performance-based bonuses, remediating personal cost increases.
However, a harsh economy means not all businesses have the funds to offer inflated pay packages, meaning that instead they will be looking to reevaluate their hiring criteria to fulfil their recruitment targets.
The Deep End of the Talent Pool
The battle for talent will be a war of attrition, but winning it will release companies from the handcuffs of stagnation. For organisations looking to attract the highest performing individuals, the remit of qualification has changed.
In the financial services industry, historically, individuals in banking would hesitate before making the leap to a tech company, with organisations similarly reluctant to bring them on board. However, with an increase of transferable skills within both disciplines, recruiters are casting a wider net.
Hiring strategies for scaling companies hoping to grow in the next year should focus on the diversification of their talent pipeline in tandem with meaningful job benefits that will demystify and advance a candidate’s overall career progression.
However, if companies are attracting talent but not retaining it, high staff turnover can dent their stability in the long run. Employee retention can manifest itself in many ways. Rewarding and incentivising high performing team members with perks can help, but management infrastructure can play an even bigger role in job satisfaction. In fact, the lack of appropriate management skills makes employees four times more likely to quit. In addition, human resource leaders placed employee retention as their number one priority in the coming years, emphasizing the onus on companies to develop long term retention strategies to maximize their business’ revenue. By ensuring high level management provides the mentorship and support needed for employees to feel valued, organisations can excel in the coming year.
Globally, the number of loss-making corporates could double by 2023, with many organisations cutting budgets to remain competitive in historically tough economic conditions. The winners and losers of the talent battle will be decided by which organisations can remediate the effects of a cost-of-living crisis that has a stranglehold on millions of employees across the UK. How effectively strategic workforce planning is implemented will be a key indicator in a business’ ability to attract and retain talent, as the year reaches its crescendo.