Permanent salary inflation hit two-year high in August

The latest Report on Jobs survey signalled further growth of permanent and temporary staff employment in August, with the latter reaching a twenty-seven month high. Meanwhile, robust demand for staff and shortages of skilled candidates drove the strongest increase in permanent staff salaries for two years.

The Report on Jobs, published today by the Recruitment and Employment Confederation and KPMG, provides the most comprehensive guide to the UK labour market, drawing on original survey data provided by recruitment consultancies and employers, as well as data on national newspaper recruitment advertising.

Commenting on the latest survey results, Michael Carter, People Services Partner at KPMG said:

ìThe figures show a rise in employment in the UK, which is attributed to an increase in the number of people working beyond the normal retirement age and an influx of workers from the ten countries that joined the EU in 2004. The retention of older workers shows a culture change in the UK, which comes at a time when UK employers have to prepare for the introduction of new anti-age discrimination legislation.

ìIt is unsurprising that there has been a significant influx of workers from the EU accession countries, as these workers are able to work in the UK without restriction. The only requirement is that these workers register on a Home Office database. Accordingly, UK employers have been able to tap into a whole new, unrestricted labour resource and we can expect this trend to continue.î

Also commenting on the report, Marcia Roberts, acting Chief Executive Officer of the REC said:

ìThe continuing expansion in the number of people back in the workforce is a strong indicator that business confidence is still rising, especially within the senior level permanent market. The strength in the temporary market also carries on unabated and re-emphasises the value employers place on recruiting flexible workers. However, the REC is still concerned that the skills shortage and continued salary inflation is clear evidence of the mismatch between jobseekersí qualifications and the current demands of the labour market.î

Report on Jobs
Staff appointments recorded further strong expansion...
Recruitment consultancies reported a further increase in the number of people placed in jobs during August. Permanent staff placements rose at a rate close to Julyís two-year high, while growth of temporary/contract staff billings was the strongest for twenty-seven months.

...driven by rising numbers of job vacancies
Higher employee appointments were underpinned by increased demand for staff at employers. Although slightly weaker than in the previous month, growth of job vacancies remained strong. Executive/Professional staff posted the most marked improvement amongst permanent employees, while Engineering/Construction workers were the most in-demand type of temp staff.

Pay inflation edged higher...
The rate of inflation of permanent staff salaries picked up to a two-year high in August, reflecting competition between employers for quality candidates. Temporary/contract staff pay rates also rose robustly over the month.

...as skill shortages persisted
Latest data signalled a further sharp decline in the availability of permanent staff during August. Skill shortages continued to be reported across a number of professions. In contrast, temporary/contract staff availability improved marginally during the latest month.