Recruitment difficulties to endure in first quarter of 2005

Overall levels of employment look set to continue to rise during the first quarter of 2005, but the rate of increase is expected to slow slightly. Perhaps reflecting much-flagged efforts to reduce levels of administrative or central government staff in the public sector, recruitment intentions are lowest in the public sector. These are some of the key findings of the CIPDís quarterly survey of HR trends and indicators. The survey covers over 1,300 employers, between them employing nearly 1.3 million people in the UK.

The survey finds that less than half (45%) of employers expect to recruit a net number of additional staff in the first quarter. The numbers of employers blaming planned redundancies on lack of demand for product or service (12.9%) or reduction in budgets (13.4%) are also higher than in recent quarters. All this implies a slight slowing of the economy and consequent easing of pressure on the labour market in early 2005.

Public vs private sector staffing
However, labour market pressures are far from disappearing, with over half (55%) of employers anticipating ongoing recruitment difficulties in the coming quarter. In the longer term, too, employers see no major tail off in employment - with a net 17% of employers expecting to employ more staff than they do now by this time next year.

Most interesting are the splits between public and private sector recruitment intentions. A net quarter of all private sector employers expect to be employing more people in one yearís time. However, the net figure for public sector employers expecting to employ more staff is zero. In other words the proportion of public sector employers expecting to employ more staff by the end of 2005 is entirely offset by those expecting to employ fewer. This is likely to reflect the view of public sector employers on the likely impact of the Governmentís plan to cut civil service and other back-office jobs - following the Gershon efficiency review published last year - while at the same time hiring more front-line workers.

Inflationary pay increases not expected
Encouragingly for the overall economy, ongoing labour market pressures are still showing no sign of fuelling inflationary pay increases. One in four employers expect pay to remain stable or rise by less than 2%, and fewer than 5% of employers expect increases to exceed 4%. The vast majority (68%) expect pay increases to average between 2% and 4%.

Dr John Philpott, CIPD Chief Economist, said:
The tight labour market is creating real difficulties for employers seeking to recruit new employees and retain existing ones. With pay restraint seemingly remaining the norm, employers are investing more time and effort in improving recruitment efforts. Many are also paying greater attention to work-life balance and family friendly policies in order to attract new staff, and retain and motivate the existing workforce.

With the outlook for wage inflation seemingly benign, despite a tight labour market, the survey adds weight to the view that interest rates have peaked.

Other key findings from the survey
- Only pensions (32%) beat recruitment costs (23%) as the number one factor expected to increase future employment costs amongst employers

- Lack of specialist skills (66%) and experience (54%) are the main reasons given for recruitment difficulties experienced in the last quarter

- More than 40% of employers had experienced a complete absence of applicants for some vacancies

- Wider, more focused, or more on-line use of recruitment advertising, appointment of managers with particular responsibility for recruitment and the use of temporary agency workers with a view to converting these to permanent appointments are the top three responses to ongoing recruitment difficulties

- There is widespread support amongst people management professionals for the more family-friendly employment policies being put forward by politicians in the run-up to a general election - two thirds of employers in our survey offered their support for such policies