Continued hiring boom and candidate shortages sees starting salaries rise, reports recruitment sector

The limited availability of candidates for new roles is driving up starting salaries amid a continued hiring boom following the Covid-19 pandemic: those are the findings of the latest monthly survey of recruitment agencies.

In the latest Report On Jobs, prepared by IHS Markit for the Recruitment and Employment Confederation (REC) and KPMG, recruitment agencies across the UK reported the sharpest monthly rise in offered starting salaries for permanent workers in 24 years during the last quarter. Hourly pay for temporary and contract roles also rose at its second highest rate since the report began being compiled in 1997.

Demand for new staff also saw a steep rise, however, recruitment consultants also reported further declines in candidate availability, citing both the ongoing economic uncertainty of the Covid-19 pandemic alongside the loss of access to workers from continental Europe following the UK’s exit from the European Union at the beginning of the year.

While London and the Midlands led the demand for new hires, particularly for temporary vacancies, the recruitment sector reported a similar picture across all regions of the UK.

Kate Shoesmith, Deputy Chief Executive of the REC, said:

“This month’s data confirms that it is a good time to be a looking for a new job. Employers are desperate to find good candidates for the many jobs on offer and this is reflected in starting salaries rising at the sharpest rate since the survey began in 1997. This will likely motivate more people to be on the lookout for new opportunities. The same goes for those on temporary contracts which are also seeing increased pay. Recruiters are working hard to fill places for employers eager to build back and recover but their job is made more difficult by worker shortages across all sectors.

“Pay increases alone, however, won’t solve the demand that has been building up over recent months. We need an immigration system that flexes to meet demand as was promised, and business and government need a long-term plan for skilling up workers. Skills shortages have been with us for a while and as our data shows are getting worse.”

Claire Warnes, Partner and Head of Education, Skills and Productivity at KPMG UK, said:

“With salaries for new hires increasing at their quickest rate in 24 years and a sharp rise in permanent placements in July, job seekers should be taking advantage of the buoyant market to land their dream role.

“But while companies want to invest in their business now restrictions are lifting, demand for new staff still outstrips supply due to low candidate availability. We know that reskilling and upskilling is needed to help people move between sectors, and there’s no doubt the ‘pingdemic’ has added an extra dimension to the recruitment challenge. Plus, with furlough due to end soon, there may be a downward pressure on pay to come.

“That’s why after a tough 18 months, businesses are now hoping for some much-needed stability in the labour market so they can focus on recovery and growth.”

The Report on Jobs is compiled by IHS Markit from responses to questionnaires sent to a panel of around 400 UK recruitment and employment consultancies.