Pay Driven Higher By Skills Shortages

Although skills shortages might be causing a headache for businesses, it appears it’s having a positive effect for some employees.

New research by the Chartered Institute of Personnel and Development (CIPD) and Adecco Group has revealed that, in the private sector, basic pay award expectations have climbed to 2.5 per cent, compared to the two per cent level that’s been recorded for the past six years.

However, in the public sector, basic pay award expectations have gone the other way, falling from two per cent to 1.1 per cent.

Skills shortages in particular are playing an important role in this upward movement, with 66 per cent of the firms surveyed revealing they’d increased starting salaries as a result.

Inflation is still identified as the main driving factor for salary rises above two per cent though, accounting for 42 per cent of pay increases at this level, while 38 per cent of businesses that are boosting salaries by more than two per cent are doing so to meet the going rate of pay at other employers.

Labour market economist at the CIPD Jon Boys said that while increasing pay is one option for private firms looking to attract the best talent, it’s not the only thing they should be concerned with.

“Employers will need to think far more creatively about how they attract, develop and retain their staff to boost both skills and productivity,” he asserted.

According to research from the Edge Foundation last year, Brexit and the Fourth Industrial Revolution are among the main factors exacerbating skills shortages in sectors such as engineering and construction.

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