We have now entered the second quarter of 2024, and the landscape of the UK labour market is still experiencing changes and challenges. The CIPD's Labour Market Outlook suggests a nuanced picture: On the back of the last three years of steady growth there's still a positive net employment balance. But, the figures are slightly down from previous years, indicating a cautious approach among employers towards staffing levels. The challenge of meeting the demand for skilled workers is more pronounced than ever, with 38% of employers reporting hard-to-fill vacancies and skills shortages.
Economic Activity and Employment Rates
A published article by the OBR on March 2024 states that the UK's employment rate for individuals aged 16 to 64 years stands at 75.0%, showing a slight decline from previous years, while the economic inactivity rate has risen to 21.8%. These figures reflect a cautious approach by employers. But GDP is up from 0.7 to 0.8 this year, inflation is down and interest rates will start to ease if this stays on course. This could signal stronger business growth going forward which will have a direct impact on the need for an agile, skilled workforce. Whilst some sectors experience bigger challenges in acquiring and retaining talent than others, talent acquisition professionals will need to adopt new approaches aligned with their people strategy, in order for businesses to succeed in 2024.
The Future Outlook
Embracing Skills-Based Hiring
Highlighted in an article by Klippa Skills-based hiring is the way companies approach talent acquisition, focusing on candidates' abilities and potential rather than traditional credentials. This approach not only broadens the talent pool but also aligns perfectly with the dynamic nature of today's job market. By prioritising skills over degrees, employers are tapping into a more diverse array of talents, crucial for adapting to rapid market changes and technological advancements. We only need to look at the impact of the temporary workforce on the UK labour market to see how this makes perfect sense. Temporary staff are often hired for their skills and expertise, rather than which University they went to or how long they worked for their past employer. Our temporary workforce has been instrumental in the UK’s economy. We can learn lessons from this ever-growing sector. “The temporary labour market is the unsung hero of the economic uncertainty of recent years. It keeps the cogs of the economy turning amidst uncertainty and labour shortages” Neil Carberry, REC Chief Executive.
It is interesting to note that in an article by Total Jobs they state in response to evolving market conditions, 34% of businesses have adjusted their hiring criteria to expand their talent pools, and 20% have removed university degree requirements from job adverts. Such strategies are part of a broader move towards skills-based hiring, with 85% of businesses adopting this approach to better match job roles with candidate capabilities
Salary Adjustments and Employee Benefits
Again, according to Total Jobs to compete for skilled workers, 40% of businesses plan to increase salaries. Additionally, benefits such as flexible working hours are becoming more prevalent, aligning with what today's workforce values most.
Business Restructuring and Staffing Trends
RGH report that temporary staffing and business restructuring trends continue to emphasise adaptability, with businesses increasingly investing in AI and training to address skill shortages. Despite these challenges, 59% of employers remain confident in meeting their recruitment needs
The Gig Economy
According to PE Global The gig economy, characterised by freelance, on-demand work arrangements, continues to be prevalent in the employment landscape mix, offering flexibility and independence to a diverse workforce that is more broadly made up of temporary and contract workers.
These trends highlight a dynamic period in the UK's temporary labour market, where both challenges and opportunities coexist, urging businesses to innovate and adapt continuously.
Sector-Specific Insights & Skill Gaps
Overview
In the evolving landscape of the UK job market, sector-specific challenges and opportunities distinctly shape the UK labour trends. For instance, according to RGH the surge in green roles, which saw a 677% increase from 2019 to 2023, highlights a shift towards sustainability, with 21% of businesses focusing on expanding their green workforce. This trend not only reflects a sector-specific shift but also underscores a broader market evolution towards environmental sustainability and innovation in job roles. According to Adecco, on the regional front, areas such as London, the southern regions, and the North West are expected to outperform others in adapting to these new workforce dynamics.
Current Landscape of Digital Transformation
According to GIGGED.A, currently, 72% of UK businesses are engaged in digital transformation projects, yet 22% of these businesses report that the absence of the right talent significantly hampers their progress. This stagnation in digital transformation efforts highlights the critical need for skilled professionals in the digital domain, particularly as the UK strives to remain competitive in a rapidly evolving global market.
Sector-Specific Insights: Financial Services
In an article by Spotted Zebra, within the financial services sector, addressing skills gaps could have a substantial economic impact. It is estimated that closing these gaps could contribute an additional £555.6 million per year to the UK economy. This significant figure highlights the potential financial benefits of effectively implementing skills-based hiring practices, underscoring the importance of aligning employee capabilities with organisational needs.
Sector-Specific Insights: Telecoms
Spotted Zebra also shines a light on the telecoms sector, and that it presents a critical example of current skill shortages, particularly in digital and IT skills. Approximately 45% of telecoms firms report a deficit in these crucial areas within their workforce. This shortage poses challenges to the sector's growth and efficiency, emphasising the need for a strategic focus on skills-based hiring to ensure that the workforce can meet future technological demands.
In-Demand Skills in Key Sectors
A document by the EDGE Foundation States that the scale of skills shortages across the UK continues to grow as a result of persistent and challenging national circumstances. Here are some of the most sought after skills highlighted by job function:
1. Human Resources: For those in administrative roles, skills in Human Resource Information Systems (HRIS), compensation, benefits management, and budgeting are essential.
2. Marketing and Creative: Effective digital marketing today requires knowledge of Content Management Systems (CMS), marketing automation tools, and Search Engine Optimisation (SEO) techniques.
3. IT and Technology: The tech landscape demands proficiency in cloud technologies like AWS, Azure, and GCP, as well as familiarity with enterprise solutions such as Dynamics, NetSuite, and SAP. Programming skills in Python and SQL are also highly valued.
4. Accounting and Finance: As you navigate the complexities of the Finance sector, mastering financial modelling, data analytics, and digital proficiency becomes crucial.
Our Predicted Trends
Strategic Use of Temporary Labour for Scalability
Businesses are recognising the strategic value of temporary labour in managing workload fluctuations and project-specific demands. By employing temporary workers, companies can scale their workforce up or down with minimal disruption, allowing them to respond more effectively to changing market conditions and opportunities. This strategic flexibility will be critical as businesses face an increasingly unpredictable economic environment.
Regulatory Changes and Compliance
As the temporary labour market grows, regulatory bodies are taking a greater interest in ensuring fair practices and compliance. New legislation may be aimed at temporary workers in the future. Companies tapping into a contingent and temporary workforce will need to stay informed and agile to navigate these changes, ensuring that they remain compliant while still benefiting from the flexibility that temporary workers provide. Partnering with a reputable Employment Business should ensure such companies are compliant and kept up to date with any upcoming changes in legislation.
Use of AI in Recruitment and Onboarding
Artificial Intelligence (AI) is revolutionising the recruitment process, making it more efficient to match workers with suitable roles. AI-driven platforms can analyse large volumes of applications to identify the best candidates based on skills, experience, and potential fit. Additionally, AI is being used to streamline the onboarding process, with virtual onboarding assistants providing real-time support to new hires, thus reducing the time it takes for them to become productive.
Hybrid Working as a Standard Offering
With flexibility high on the agenda for workers in 2024, the trend for fully remote work, which saw exponential growth during the COVID-19 pandemic, has experienced a decline. Many organisations, particularly within the Professional Services sector, prefer a total return to the office. The overall trend is leaning toward 3- 4 days in the office with the remaining days working from home. This hybrid model is replacing fully remote working as the “go to” offering, balancing flexible working conditions with greater productivity. Offering hybrid and remote working not only broadens the talent pool for businesses but also aligns with the expectation among workers for flexible work environments. The challenge for businesses will be to integrate hybrid and remote workers effectively, ensuring they are engaged and productive.
Focus on Employee Well-being
Employee well-being is becoming a priority as companies focus on staff retention. Employers are now more attentive to the health and satisfaction of their workforce. This trend is driven by an understanding that a happy workforce is a productive one. All workers, including temporary and contingent workforces are likely to see improved working conditions, including fair pay, mental health support, and professional development opportunities. Businesses that invest in the well-being of their workers can expect enhanced loyalty and reduced turnover.
Increased Demand in Tech and Green Jobs
As the UK continues to emphasise digital transformation and environmental sustainability, roles in technology and green sectors are expected to surge. Companies are increasingly reliant on temporary IT professionals to manage cyber security, data analytics, and software development projects as the skills shortage in the UK continues. Similarly, the green sector will see a rise in demand for workers in roles related to renewable energy projects, waste management, and environmental consulting, in order to meet the government's commitment to achieving carbon neutrality.
Conclusion
We've delved into the complexities and dynamic shifts affecting the jobs market as we transition towards Q3 2024 and beyond. From the rise of skills-based hiring and the increasing significance of a contingent temporary workforce, to the anticipated challenges and growth across various industries, it's clear that adaptability and strategic innovation are key to navigating these changes. Businesses need to reassess and realign their workforce strategies to remain competitive and responsive to market demands. For employers, workers, and policy-makers alike, the path forward will require a continuous commitment to flexibility, inclusion, and adaptability—to not only thrive in the face of emerging trends but also to contribute positively to the UK's economic resilience and growth.