11 May 2018

A positive Job Market X NLW

Richard Jaye

It’s not all doom and gloom out there. Despite what we hear and read, it is encouraging to know that eight in ten employers believe that economic conditions are improving, according to the latest Jobs Outlook survey by the REC.

Overall, 81 per cent of businesses plan to hire more permanent staff in the next three months. However, the data also indicates that hiring intentions are weakening within smaller businesses. In February 62 per cent of small businesses (1-10 employees) said they plan to hire in the next three months, down from 74 per cent in January.

The regular survey of 600 employers also found that:
• 78 per cent plan to take on more permanent staff in the medium term (3-12 months).
• 95 per cent are operating with either no spare capacity or only ‘a little’ capacity to take on more work with their existing workforce.
• 17 per cent expect a shortage of candidates for permanent roles over the next 12 months, while 15 per cent anticipate a shortage for permanent professional or managerial positions.

REC chief executive Kevin Green says: “It’s encouraging to see positive data around business confidence and hiring intentions, but the survey also suggests weakening demand for staff from SMEs – this might be a reaction to the incoming National Living Wage or uncertainty caused by the impending EU referendum”.

So what effect will the increase in the National Living Wage have?

The REC released data showing how employers respond to rising wage bills.
A survey of 191 employers found that:

• A fifth (19 per cent) will invest in training or take measures to increase staff productivity
• Four in ten (39 per cent) will take no action
• 14 per cent will take on fewer staff than planned
• 8 per cent will reduce staff overtime and bonuses
• 2 per cent will make redundancies
• 8 per cent will raise the cost of their goods/services
• 10 per cent are unsure about the action they will take.

Responding to the findings, REC head of policy Kate Shoesmith says:

“Many employers are adopting a ‘wait and see’ approach to the National Living Wage, with 40 per cent saying they will take no action and a further 10 per cent saying they don’t know what their response will be. A significant proportion of businesses will not be affected by the first NLW, but the government has pledged to raise the rate to at least £9 by 2020 – this is likely to impact many firms’ longer-term hiring strategies.
“It’s encouraging that a fifth of employers are planning to increase productivity, but this is easier said than done. Low-pay sectors such as health and social care are already finding it difficult to attract and retain staff – and there are question marks about how care providers are supposed to meet cost increases.
For recruiters like us, the Twentyfour Recruitment Group, it’s important to understand how our candidates and clients might react to the NLW so that we can provide expert advice.