It has been a challenging few years for the recruitment sector, and it looks like things might get worse before they start getting better.
Although employment rates have largely returned to pre-pandemic levels this year, the outlook for next year looks bleaker. Rising food and energy costs have exacerbated the cost-of-living crisis, and recent government budget U-turns have steepened inflation and sent the UK headfirst into another recession.
As a result, sourcing and retaining talent is becoming increasingly complex. Recent reports suggest that the job market is experiencing a period of stagnation, with many companies forced to freeze hiring as they struggle to keep up with salary expectations.
So, how can business leaders overcome economic uncertainty and achieve growth in this landscape? The solution lies in analyzing market trends and planning ahead to ensure every skills gap is covered as we enter the new year.
Understanding job market stagnation
In recruitment, market stagnation refers to a situation where job growth slows, output plateaus, and wage increases flatten, leaving candidates demanding more than employers can offer.
Stagnation often follows a period of stunted economic growth, which we have experienced since the first coronavirus lockdown in 2020. The economy showed signs of recovery after the government eased restrictions. However, hiring activity is declining as rising costs and competition for staff cause employers to become more cautious about their hiring plans.
The most recent KPMG and REC ‘UK Report on Jobs’ survey indicated that starting salary growth slipped to an 18-month low, permanent hiring has fallen for the first time in almost two years, and temporary billings have stagnated. Hiring intentions have increased, but recent reports suggest that business confidence in the UK’s economy has turned negative due to worries over labor shortages, political disruption, and inflation.
Consequently, recruiting and retaining staff in the current economic climate is becoming more challenging. People are less likely to change jobs for the same or less than they are currently earning, with candidates that are going to market upping their salaries by as much as 30%.
Equally, in today’s turbulent market, workers may stay put rather than move in anticipation of further economic instability. So, unless hiring managers include adequate long-term budgets for staff increases at the start of the financial year, they will likely feel the sting of stagnation as we head into a new year.
As a result, employers must assess their hiring needs sooner rather than later to avoid facing a scenario where they are desperate to fill a role but lack the funding and resources to present their top candidate with an enticing job offer.
Taking a proactive recruitment approach
It is easy to grow complacent when things seem to go smoothly in the short term. But if we have learned anything from recent disruptions, it is just how quickly things can change.
Candidates still drive the job market, so companies have their work cut out to attract and retain workers. Business moves fast in the modern world, and employers must always stay one step ahead of their staffing needs.
To successfully overcome existing and upcoming recruitment challenges, hiring managers must focus on improving the most critical areas of the recruitment process.
Review benefits packages
Before embarking on a hiring drive, which can often prove expensive and time-consuming, companies must assess market trends to ensure they can make a competitive offer and fulfill regular pay rises in line with industry expectations.
The same goes for existing employees. By investing in reward schemes, training, and bonuses, hiring managers can fill skills gaps from the inside and boost retention, reducing the pressure to keep recruiting more staff.
Focus on diversity and inclusion
Diversity and inclusion policies (or lack thereof) hold great sway over today’s workforce, playing an integral role in progressive employee value propositions — the way that employers attract and engage desirable employees.
Highlighting issues and opportunities within this business area is a vital part of social responsibility for modern organizations. Plus, nurturing an inclusive, culture-focused workplace will invite interest from a wider pool of candidates, increasing the likelihood of hiring success and retention.
Enlist professional support
Meeting candidate expectations for salary, bonuses, and benefits has always been important. It is now non-negotiable, as market stagnation threatens to impact companies’ bottom lines.
Enlisting the support of a third-party recruitment team ensures someone is continuously monitoring the job market, conducting accurate budget assessments, and overseeing the entire recruitment process. With these tasks taken care of, business leaders can turn their focus from merely staying afloat to generating long-term growth amidst economic uncertainty.
By Julie Mott, managing director of Howett Thorpe.