Companies desperate to recruit skilled workers push up salaries

The economy may be heading for recession and the jobs market is showing signs of cooling, but employers are still struggling to find enough workers, which is likely to push up salaries again this year.

More than half of British businesses expect to raise pay again in 2023 to “stay competitive”, according to the Chartered Institute of Personnel and Development.

The expectation among employers is that pay will rise, on average, by another 5 per cent in 2023, according to the institute’s latest quarterly employment report. There has not been a higher pay rise forecast since the CIPD, a professional body for human resources workers, launched its first report in 2012.

“Skills and labour remain scarce in the face of a labour market that continues to be surprisingly buoyant, given the economic backdrop of rising inflation and the associated cost of living crisis,” Jon Boys, the institute’s senior labour economist, said.

While it is predicted that private sector workers will get a 5 per cent rise this year, public sector workers are expected to receive an increase of 2 per cent, the institute said, which would be likely to add to tensions between unions and employers and would raise concerns that more strike action could be on the way.

The survey, which took in responses from more than 2,000 companies, suggested that bigger pay rises could be on the way for some staff, especially those in “hard-to-fill” roles. Seven in ten companies wanted to hire new staff over the next three months, although nearly 60 per cent noted that the workers they were looking for were proving hard to find.

To address that issue, half of businesses have sought to improve the skills of existing staff, while a third have chosen to increase employees’ duties. To make a job seem more appealing to applicants, 43 per cent of companies increased the pay they were offering.

A long gap on someone’s CV used to be a red flag to employers, but Boys said many were “recognising the potential to attract certain groups to fill vacancies”, including those who had been out of work because of caring commitments or health conditions. More than a third of respondents planned to make such hires over the next three years, compared with 29 per cent who said they had done so in the past three years.