UK employees receive loyalty dividends as firms focus on retention

Average advertised salaries have dropped to a year-long low, as companies shift emphasis from recruitment to retention, and reward their recession veterans with long overdue pay rises, according to the latest UK Job Market Report from Adzuna.co.uk.

Advertised UK salaries stood at £33,505 in July 2015, down 0.6% from £33,696 in June and 1.1% lower than the £33,873 recorded in July 2014. This marks the first time advertised salaries have fallen on an annual basis since June 2014, with average salaries driven down by companies channelling resource into incentivising established middle managers and senior employees to stay, rather than recruiting talent from elsewhere.

Key findings from the report include:

• Average advertised salary falls to £33,505 in July, down 1.1% annually from £33,873 last July, as firms focus on retaining top talent rather than recruitment
• Number of advertised vacancies surges 3.3% month-on-month in July, hitting new post-recession record of 1,128,112 positions, as lower-paid positions miss the salary mark
• Ratio of jobseekers to vacancies has halved year-on-year, with 0.64 jobseekers per vacancy in July, down from 1.14 in July 2014, as competition for jobs falls to new record low
• London’s streets no longer paved with gold, as salaries in the capital slip 2.8% year-on-year to £40,396, the largest fall of any region
• But prospects improving for beleaguered Hull and Bradford, as advertised Yorkshire and the Humber salaries rise 3.2% compared to July 2014

Competition for jobs has fallen to a new record low, with just 0.64 jobseekers for every advertised position. This compares to 0.67 in June, and 1.14 in July 2015, meaning it is now nearly twice as easy to find a job in July 2015 as during the same period last year.

Job vacancies, meanwhile, are rising. July saw 1,128,112 job vacancies in the UK, up 3.3% from 1,092,030 in June, and 29.3% higher than the 872,629 vacancies in July 2014, driven by an increase in the number of entry-level roles left unfilled due to the meagre salaries on offer. The loyalty dividend pay-off has also led to a decrease in job advertisements for more senior, better paid positions.

Table 1:

“Companies are clinging on to the skilled workers they already have, rather than bringing in new talent at the top,” said Andrew Hunter, co-founder of Adzuna, “They are rewarding those loyal employees that stood by their side during the recession, but who hadn’t seen salaries rise since these lean years. Now, these employees are receiving their recession rewards, as workloads sprawl and middle managers become ever more important. Companies are returning to the classic pyramid structure, by nurturing their middle layer. They are relying more on managers to vet and oversee their junior staff, as more business comes through the door.”

But, according to Hunter, this betrays a trend of organisations shifting their focus. “By boosting the salaries of their existing staff, employers have less money in the bank for recruitment. This means the jobs market focus has shifted from recruitment to retention. While skilled labour is becoming much more expensive, employers have their pick of this year’s fresh crop of graduate talent. But they have yet to realise that they will need to raise entry-level salaries to attract the best, and many positions are remaining unfilled.”

Despite falling competition for jobs and the increase in vacancies, the most recent ONS figures show unemployment is creeping up. For the first time in two years there have been two consecutive increases in unemployment, indicating a struggle to match jobseekers with the skills required by many of the available positions.

Hunter continues, “The fact that unemployment is rising while it’s getting even easier to find employment suggests that we have a real problem matching people with jobs. Partly this is due to a disconnection between the skills people have and the talents employers need, but geographical factors are playing their part too. As ever, people flock to the southern regions of England in search of work, ignoring the many opportunities that are springing up in the north. It’s not quite a land of opportunity for all – many northern towns still have the highest number of jobseekers per vacancy. But there are well-paid jobs waiting for people with the right skills.”

Savvy jobseekers are looking for work in skills-shortage sectors

The most in-demand professions are managing to avoid the salary stagnation. Advertised salaries in the Trade & Construction sector have seen significant increases as understaffed employers compete for skilled labour. Advertised salaries in the sector stood at £38,353 in July 2015, a strong 4.7% year-on-year improvement from £36,637 in July 2014.

‘Handy’, an app that puts consumers directly in touch with independent maintenance workers and cleaners, boasted the most viewed job ads in July, revealing jobseekers are increasingly keen to capitalise on the skills-shortage, and join professions which pay top-dollar. Other companies using this business model like Uber, Hassle and Taskrabbit are also proving influential in the employment market.

Table 2: Biggest improvers – job sectors by average salary

“As a model, businesses like Uber, Handy, Hassle and Taskrabbit are spreading and rapidly becoming ever more widely used,” says Hunter. “They are set to change the way we think about employment. By putting independent business owners, often one-person operations, directly in touch with consumers, it changes the meaning of being ‘self-employed’. Through apps like this, workers can now directly and flexibly offer their services without being tied into long-term contracts.”

Healthcare & Nursing jobs are feeling the pinch, with advertised salaries standing at £35,244 in July, dropping 6.5% from £37,679 in July 2014. The size of this year-on-year fall is second only to advertised salary slips in the embattled Energy, Oil & Gas sector, where advertised salaries fell 12.7% to £40,486 in July 2015 from £46,369 in July 2014.

Table 3: Worst improvers – job sectors by average salary

“The proliferation of part-time care work is pulling down advertised salaries in Healthcare & Nursing,” asserts Andrew Hunter. “We have an ever-increasing ageing population in need of carers. It’s likely that this trend is set to continue, as lower-paid care work for the elderly comes to represent a larger proportion of employment opportunities in the sector.”

London’s streets no longer paved with gold

Salaries have fallen in seven out of the twelve UK regions. The biggest fall was in London, where salaried positions have dropped 2.8% year-on-year to stand at £40,396. Scotland saw similar-sized falls to £31,725 with a 2.7% decrease over the same period, while advertised salaries in South East England fell 1.3% to £31,880.

Table 4: Biggest improvers – UK regions by average salary

Andrew Hunter explains, “London has a unique concentration of freelance, contracting and consultancy jobs, which allow companies to outsource specialist roles. They had their time in the limelight as the economy started to shift out of the recession. Rounds of downsizing had left many companies running their operations with skeleton crews that had to be fleshed out with contractors. But now that companies can afford to invest beyond the basics of economic survival, these positions are being brought back in house. The previously high salaries commanded by London consultants only work in an environment of scarcity. Now they’re being pared back, and advertised salaries in the capital are paying the price.”

Aside from the beleaguered south, the north of England is enjoying a wave of advertised salary increases. Yorkshire and The Humber experienced the highest annual rise, up 3.2% on last year’s figures to stand at £30,483, closely followed by increases in the North East to £29,737(+1.7%) and North West to £30,165. (+1.5%).

“With investments in the region of £1.3bn going to Yorkshire’s infrastructure alone, the North is seeing a startling increase in opportunities for trade and construction workers,” concludes Hunter. “The Northern Powerhouse is champing at the bit, but it needs more skilled workers. Advertised salaries are on the up in these high-growth areas to persuade people to head north and rebalance the skill-shortage.”

The cities with the worst jobseeker to vacancy ratios have actually been showing rapid rates of improvement. Although Sunderland is the hardest place to find work with 4.54 jobseekers per vacancy, this is a vast improvement compared to last year when there this figure was as high as 11.6 – and it’s this rapid improvement from the other members of the top five that has seen Belfast join their ranks.

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