Recruitment Market Update 2022

Bringing you the latest industry updates regarding the temporary and permanent employment market, collecting data sourced from the Recruitment & Employment Confederation (REC), CIPD, KPMG and the Office for National Statistics (ONS). We hope you find it informative and a source of valuable information.

November & December 2022 Update

The latest statistics issued by the Office for National Statistics shows an overall picture of strong demand from employers combined with starting rates of pay continuing to rise which is now feeding into awards for companies’ existing staff.

Hiring and Economic Activity

Despite seeing a slowdown in recruitment activity across the UK, there is no sign that the employment market is starting to shrink with the latest data for November showing another monthly increase of payrolled employees, up 107,000 on the revised October figures, to a record 29.9 million.

Part-time employees are generally decreasing since the beginning of 2022, however the number of people with a second job has increased by 43,000 to 1.253 million.

There were 417,000 working days lost due to labour disputes in October, which is the highest since November 2011.

The number of job vacancies for the last quarter is 1,187,000, which is a decrease of 65,000 from the previous quarter.  Despite this, the number of vacancies remains at historically high levels and vacancies across all industries are above pre-pandemic levels. 

Economic inactivity was estimated at 21.5%, 0.2% lower on the quarter, driven by those aged 50-64 years leaving the employment market and taking retirement.  However, this rate increased against the year and is still above pre-pandemic levels.

Stats at a glance

  • The UK employment rate was estimated at 75.6%, 0.2% lower than the previous three-month period, and 0.1% lower than before the pandemic.
  • The UK unemployment rate was estimated at 3.7%, 0.1% higher than the previous three-month period and 0.3% below pre-pandemic levels.  
  • Growth in average total pay among employees, including bonuses, was 6.1%; for regular pay this is the strongest growth in regular pay seen outside the pandemic period.

Topical Data – More than four in ten employers believe that changing the immigration system, encouraging firms to recruit from a more diverse talent pool and reforming the Apprenticeship Levy are most needed to keep the labour market strong in 2023.  What other actions will help the labour market?

See data below following survey undertaken by the Recruitment & Employment Confederation:

Commenting on the latest statistics, Neil Carberry, Chief Executive of the Recruitment & Employment Confederation said:

 “The overall picture we see is one of a labour market that is still defined by labour shortage constraining its ability to grow. That’s why businesses need to work with their recruiters on innovative and effective strategies, and all firms are looking to Government to act on some of the barriers – from skills to immigration, and right to work checks to employment support, there is a huge amount the Government could do to fire up our labour market.”

October 2022 Update

According to the latest data, despite increased levels of employer caution, vacancies are still at historically high levels – it is still a good time to be looking for work. Unemployment remains at record lows. That means economic inactivity – those out of work and not looking for it – is a growing challenge, with the ONS figures showing it has hit a new high.

Last summer, REC members warned about rising rates of economic inactivity amongst working age people. Now, with 630,000 more people not working and not seeking work than before the pandemic, government has recognised the need for intervention. The onus is on employers to change this perception by enabling flexible working, supporting employees with caregiving responsibilities, addressing age bias in hiring and investing in lifelong learning.

Hiring & Economic Activity

Global economic activity is experiencing a broad-based and sharper-than-expected slowdown, with inflation higher than seen in several decades. The cost-of-living crisis, tightening financial conditions in most regions, Russia’s invasion of Ukraine, and the lingering COVID-19 pandemic all weigh heavily on the outlook. Global inflation is forecast has risen by 8.8 percent in 2022 to decline to 6.5 percent in 2023 and to 4.1 percent by 2024.

While we continue to see greater economic uncertainty, rising costs and candidate shortages reducing the pace of growth; in the latest data in August to October 2022, vacancies were 429,000 (54%) above the January to March 2020 pre-coronavirus (COVID-19) level but only 32,000 (2.7%) above the level of a year ago; as reflected in the ONS chart below:

In August to October 2022, the total number of vacancies was 429,000 (54%) above the January to March 2020 pre-coronavirus (COVID-19) pandemic level, with the largest increase in human health and social work, which was up 76,000. When comparing with the same time last year, total vacancies increased by 32,000 (2.7%), with human health and social work again showing the largest growth of 21,000 (11.1%).

The number of vacancies remains high after a prolonged period of positive growth from July to September 2020 to March to May 2022, and provides the basis for a historically tight labour market. In July to September 2022, the number of unemployed people per vacancy was at 1.0, unchanged from its level in the previous quarter as reflected in the below ONS chart:
 

Stats at a glance

  • Quarterly growth fell for the fourth consecutive period to negative 3.6% in August to October 2022.
  • In August to October 2022, vacancies were 429,000 (54%) above the January to March 2020 pre-coronavirus (COVID-19) level but only 32,000 (2.7%) above the level of a year ago.
  • In July to September 2022, the number of unemployed people per vacancy was at 1.0, which is unchanged from the previous quarter and in of a tight labour market.
  • Growth in average total pay, including bonuses, was 6% and growth in regular pay, excluding bonuses, was 5.7% among employees in July to September 2022; this is the strongest growth in regular pay seen outside the pandemic period.

    Topical Data – National Insurance contribution decrease and new charge rates announcement

    The temporary 1.25% increase made to National Insurance rates in April 2022 that were put in place to support the recovery of the NHS following the Covid-19 pandemic has been reversed and will now decrease by 1.25% from 15.05% to 13.8% for Employer and Employee’s National Insurance contributions. This becomes effective from 7th November 2022, for more details please refer to the Gov.uk website.

    September 2022 Update

    As expected, the recent political turmoil has not helped with economic uncertainty, affecting employer’s confidence in making hiring and investment decisions. 

    However, employers are continuing to face the long-running issue of labour shortages with many struggling to find skilled candidates.  This is evidenced by the volume of job adverts remaining high and no sign that the employment market has stalled.

    Hiring and Economic Activity

    Despite seeing a slowdown in recruitment activity across the UK, as highlighted by the latest permanent and temporary staff hiring data, there is no sign that the employment market is starting to shrink, as labour shortages mean employers still need to hire.

    The number of job vacancies for the last quarter is 1,246,000, a decrease of 46,000 on the previous quarter, however vacancies remain 56.6% higher than pre-pandemic levels and 10.3% above the levels of a year ago.  The industry sectors displaying the most significant falls in vacancy numbers were accommodation and food service activities.

    Overall, vacancies remain high after a prolonged period of positive growth.  Despite the market contracting recently, the large number of vacancies combined with low levels of unemployment contribute to an historically tight labour market.  

    Notably, in June to August 2022, the number of unemployed people per vacancy fell to a new record low of 0.9%.  Data below shows the number of active jobs adverts maintaining the same levels as earlier in the year, despite the decrease from the unprecedented levels of growth seen in June/July.

    Stats at a glance

    • The UK employment rate was estimated at 75.5%, 0.3% lower than the previous three-month period, which had a notably higher employment rate than other periods. The number of employees decreased on the quarter, whilst self-employed workers increased.  The employment rate is 1% lower than before the pandemic.
    • The UK unemployment rate was estimated at 3.5%, 0.3% lower than the previous three-month period.  This is the lowest rate since December to February 1974.
    • The latest data of payrolled employees for September shows another monthly increase, up 69,000 on the revised August figures, to a record 29.7 million.
    • Growth in average total pay, including bonuses, was 6% and growth in regular pay, excluding bonuses, was 5.4% among employees from June to August, this is the strongest growth in regular pay seen outside the pandemic period.

    As part of a Business Insights and Conditions Survey ran in early October, The Office for National Statistics shared the results from businesses who were asked how their staffing costs have changed over the last three months and how they expect them to change in the future, across the same period of time.  

    Nearly half (49%) reported an increase in staffing costs over the last three months, with just over 40% estimating that staffing costs will stay the same for the next three months.

    Topical Data – Holiday Pay for Irregular Hours Workers

    As part of the REC’s Jobs Outlook survey published in October, feedback identified that a significant proportion of in-house HR and recruitment teams were confused about holiday pay for irregular hours workers, following the Harpur Trust v Brazel judgement in July 2022.  The Supreme Court ruled that employees on permanent contracts who only work for part of the year, such as seasonal workers or teachers, should receive the same statutory holiday entitlement as employees who work the full year.

    15% of REC members surveyed reported being confused, whilst a further 64% were unsure as to whether the organisation understood the impact. Similarly, more than one in five (22%) were unsure about what alternative calculation to an accrual could be used for irregular hours workers. One other area of great uncertainty (58%) related to whether the organisation
    understood its obligation in reminding workers to take their entitled leave

    Click for case details: Harpur Trust (Appellants) v Brazel (Respondent) – The Supreme Court

    • Quarterly growth fell for the fourth consecutive period to negative 3.6% in August to October 2022.
    • In August to October 2022, vacancies were 429,000 (54%) above the January to March 2020 pre-coronavirus (COVID-19) level but only 32,000 (2.7%) above the level of a year ago.
    • In July to September 2022, the number of unemployed people per vacancy was at 1.0, which is unchanged from the previous quarter and indicative of a tight labour market.
    • Growth in average total pay, including bonuses, was 6% and growth in
      regular pay, excluding bonuses, was 5.4% among employees from June to
      August, this is the strongest growth in regular pay seen outside the
      pandemic period.

    Commenting on the latest statistics, Claire Warnes, Head of Education, Skills and Productivity at KPMG UK said:

     “The UK jobs market remained tight in September, with candidate shortages impacting recruiters’ abilities to fill jobs. Deepening economic uncertainty has also meant that workers are choosing to stay put in current roles, rather than apply for new roles, leading to a moderation in the overall rate of vacancy growth. 

    Some employers, even those who anticipate that the recession may be short, are taking steps now to contain costs, including hiring freezes. Those employers who continue to invest in their workforce, particularly upskilling, may find they weather the recession better and will be in a stronger position to benefit from the upturn as and when it comes.”

    August 2022 Update

    According to the latest data, the employment market highlights a further increase in recruitment activity during August, reporting another month of growth in temporary and permanent  placements.

    Unsurprisingly, the economic uncertainty continues to impact all aspects of business as we come to the end of the summer. REC members suggest the impact on the confidence in the market is driven primarily by candidates showing caution, resulting in further tightening of the market as pay rates and inflation prices continue to rise.

    Hiring & Economic Activity

    Despite seeing an increase in both temporary and permanent appointments during August, the rate of permanent placement growth has little-changed from July’s 17-month low. While the demand is strong for workers, we continue to see greater economic uncertainty, rising costs and candidate shortages reducing the pace of growth as reflected in the ONS chart below:

    The latest REC figures in the chart below show a further slowdown in vacancy growth across the private and publics sectors in August.

    The steepest increase in demand is seen for the private sector – with temporary and permanent positions rising at identically faster rates. The weakest increase in vacancies has once again signalled for short-term positions in the public sector, where growth eased to a 17-month low.

    According to the latest ONS data below, the average weekly earnings were estimated at £613 for total pay (inclusive of bonuses) and £571 for regular pay in July 2022. Figure 1 shows that average weekly earnings have steadily increased, with the exception of the early months of the coronavirus (COVID-19) pandemic.

    Stats at a glance

    • In June to August 2022, vacancies were 470,000 (59.1%) above the January to March 2020 pre-coronavirus (COVID-19) level, and 215,000 (20.4%) above the same time last year totalling 1,266,000.
    • Payrolled employment increased by 71,000 employees (0.2%) in August 2022 when compared with July 2022.
    • Annual employment growth in August 2022 was highest in the finance and insurance sector (an increase of 13.4%), and lowest in the education sector (an increase of 2.1%).
    • Growth in average total pay (including bonuses was 5.5% and growth in regular pay (excluding bonuses) was 5.2% among employees in May to July 2022.
    • Growth in total and regular pay fell in real terms (adjusted for inflation) on the year in May to July 2022, at 2.6% for total pay and 2.8% for regular pay; this is slightly smaller than the record fall we saw last month (3.0%), but still remains among the largest falls in growth since comparable records began in 2001.
    • Average regular pay growth for the private sector was 6.0% in May to July 2022, and 2.0% for the public sector; outside of the height of the pandemic period, this is the largest difference we have seen between the private sector and public sector.
    • The UK unemployment rate was estimated at 3.6%, 0.2 percentage points lower than the previous three-month period, and 0.4 percentage points below pre-coronavirus pandemic levels.

    Topical Data –  Living Wage Foundation Responds to Cost of Living Crisis

    Following last month’s update, this week, the Living Wage Foundation announced the new real Living Wage rates.

    With living costs continuing to rise, paying the real Living Wage has never been more important, as it remains the only UK wage rate to be calculated on the cost of living, with the new rates of £11.95 for London and £10.90 for the rest of the UK, reflecting the unprecedented price rises faced by UK households.

    July 2022 Update

    According to the latest data, although the employment market is showing positive signs for the economy moving forward based on the conditions faced during the pandemic, it’s becoming apparent that we are yet to see the full extent of the cost of living crisis.  

    This is reflected in the slowest increases seen in both permanent staff appointments and temporary staff requirements for 17 months, as businesses face financial pressures as their costs increase due to rising inflation, tax and uncapped energy prices.

    Although this situation understandably creates market uncertainty, it’s important to remember that the latest ONS figures suggest the employment market is entering a potentially difficult period for the economy in good shape, with competition for excellent workers remaining strong.

    Hiring & Economic Activity

    Despite the cooling of vacancy growth, chart data below shows that there were approximately 1.60 million active job adverts in the week of 6-12 June.  This was 6% more than the previous week and 5% up from a month earlier.  

    Following an increase in the employment rate since early 2012, the latest data shows a decrease from the start of the pandemic, however, there has been growth since the end of 2020 with the number of full-time employees increasing to a record high during the latest three-month period.  The number of part-time employees continued to recover, however the number of self-employed workers has remained low.  See chart below indicating the split across different categories of employment for those aged 16 and over:

    Compared with the previous three-month period, the total actual weekly hours worked in the UK by those aged 16 or above increased by 6.5 million hours to 1.05 billion hours.  This is still 6.4 million below pre-pandemic levels. Interestingly, the total actual hours worked by women of 439,221, exceeds pre-pandemic levels of 429,664.   Average weekly hours have now returned to levels similar to those seen before the pandemic, with those worked by part-time workers 0.3 hours above pre-virus levels.  Consequently, the shortfall in total hours compared with pre-pandemic levels is down to the reduced numbers in employment. Chart below:

    Stats at a glance

    • The UK employment rate was estimated at 75.9%, 0.4% higher than the previous three-month period, but 0.7% lower than before the pandemic (Dec 19 to Feb 2020 period).
    • The UK unemployment rate was estimated at 3.8%, 0.1% lower than the previous three-month period, and 0.2% below pre-pandemic levels.
    • The UK economic inactivity rate was estimated at 21.1%, 0.4% lower than the previous three-month period, but 0.9% higher than before the pandemic.
    • UK GDP is estimated to have increased by 0.8% in Q1(Jan to March 2022), and by 8.7% compared to Q1 2021.
    • UK GDP is projected to rise by 3.8% in Q4 2022 and then fall to 1.8% in the end of 2023.

    Topical Data –  Living Wage Foundation Responds to Cost of Living Crisis

    In response to the unprecedented rise in the cost of living, the Living Wage Foundation has taken the decision to bring the next rate announcement forward to September, outside of Living Wage Week, which normally takes place each November. See image below for existing rates.

    Commenting on the announcement, Katherine Chapman, Director of the Living Wage Foundation said:

     The real Living Wage is the UK’s only wage rate independently calculated to meet the cost of living and, for workers struggling to keep their heads above water as prices surge, it’s more important than ever before. That’s why, with the rate of inflation fast approaching double figures, we are bringing forward the annual announcement of the 2022-23 Living Wage rates to late September.  Over 10,000 employers have already made the commitment to do right by their staff and pay a wage in line with living costs. 

    In addition to paying the Living Wage, it has been brilliant to see Living Wage Employers leading the way with many creative and impactful initiatives to support staff with the cost of living over the past few months. Rising prices are eating away at all of us, but nobody is feeling the pinch more than the 4.8 million low paid workers across the UK. It’s never been more important that employers who can afford it protect those who will be most affected by price rises by paying a wage based on the cost of living.”

    June 2022 Update

    The latest Labour Force Survey (LFS) from the ONS estimates for February to April 2022 show that there was growth in the employment rate, while unemployment rate declined to 3.8% and the economically inactive rate remained steady at 21.3%.

    The employment rate increased by 0.2 percentage points on the quarter to 75.6% but is still below pre-coronavirus (COVID-19) pandemic levels.

    Hiring activity

    The number of full-time employees climbed over the quarter to a record high.

    The number of self-employed workers has remained low, although they have also increased over the quarter.

    The most timely estimate of payrolled employees for May 2022 shows a monthly increase, up 90,000 on the revised April 2022, to a record 29.6 million.

    The REC’s labour market tracker shows there has been a sharp increase during June in active job adverts, which continues to break records, now standing at 1,688,606.

    Recruitment market update

    New National Living Wage

    Almost half of UK employers have restructured pay grades to reflect the NLW increases. However, for almost two in five employers the rise in the NLW has no impact on their business, while just as many are increasing the prices of products and services. 

    More than one in six employers have also seen an increase in the productivity of their existing workforce, whilst a further 18% have increased the use of technology and automation tools. Only a small proportion of employers saw the NLW increase negatively affect their staff, for example by reducing their hours, freezing hiring activity, or making redundancies.

    Employment data

    During the latest three-month period (February to April 2022), the increase in the employment rate and the decrease in the unemployment rate were largely driven by males, while the unemployment rate for women was largely unchanged. The economic inactivity rates for both men and women decreased.

    UK economic status rates by sex, seasonally adjusted, cumulative change from December 2019 to February 2020, for each period up to February to April 2022:

    May 2022 Update

    According to the latest data, recruitment intentions are still above pre-pandemic levels and appear to be on an upwards trajectory, with 74% of employers stating they are planning to take on new staff in the next quarter.  However, candidate shortage difficulties remain with 45% saying they have hard-to-fill vacancies.

    44% of employers have tackled hiring difficulties by increasing salaries, but it’s thought they may be reaching a limit now with only 27% anticipating raising pay in future to address candidate shortage.  

    On a positive note, companies are also looking to other means to tackle staffing challenges with 39% focusing on upskilling existing staff and 38% advertising more jobs as flexible.  These actions will hopefully aid recruitment, as well as staff retention in the future.

    Hiring Activity

    Job vacancies have risen to a new record of 1,295,000, an increase of 33,700 from the previous quarter, however the rate of growth in vacancies has continued to slow down.  Feb to April 2022 saw all industries rise above their Jan to March 2020 pre-pandemic levels, with the largest increases in construction, the arts, recreation and entertainment.

    This chart shows the increase in overall active job adverts since the beginning of 2022.

    The start of Q2 registered continued sharp rises in both permanent placements and temporary billings amid reports of rising client activity and demand for staff.  However, there are signs of this level of growth easing as low candidate supply hindered upturns in hiring activity.

    Employment Data

    The UK employment rate was estimated at 75.7%, 0.1% higher than the previous three month period and 0.9% lower than before the pandemic.  The increase in employment rate was driven by the movement of people aged 16-64 years from unemployment to employment.  However, there was also a record high movement of people from economic inactivity into employment. See chart below.

    Interestingly, total job-to-job moves also increased to a record high of 994,000 driven by resignations, rather than dismissals during the Jan to March 2022 period.  

    The UK unemployment rate was estimated at 3.7%, 0.3% lower than the previous three month period and 0.2% lower than before the pandemic.

    Total hours worked increased compared with the previous three month period, but are still below pre-pandemic levels.

    The redundancy rate of 13% remains low at pre-pandemic levels.  This figure stood at 33% in summer 2020 and at 16% prior to the pandemic.  

    Topical Data – Enhance job quality for workers and business outcomes using technology

    The latest research from the CIPD, the professional body for HR and people development, shows understanding of key people issues and consultation with staff is needed for investment in technology to lead to positive outcomes. 

    Evidence has identified that wider adoption of digital technology by organisations is needed to boost UK productivity and lift living standards for employees over the longer term.  However, it’s important to manage employees effectively to ensure they understand any new requirements using new technology to boost firm performance.

    To support employers, the CIPD, in collaboration with the Institute for the Future of Work, has created a guide on how to invest responsibly in technology, setting out five key stages for consideration.  Click here.

    Topical Data – ED&I

    As part of the REC’s Jobs Outlook survey published in May, feedback identified that a significant proportion of employers have not implemented any of the ED&I policies below as part of their hiring process.

    The most common method employers applied to their recruitment processes was ‘using wording specifically adjusted to be inclusive in our job adverts’, with 31% introducing this more than a year ago and 18% in the last year.  While 29% of employers started specifically stating an interest in diverse candidates within their jobs adverts, more than a year ago.

    Click for our blog: Why gender-neutral language improves recruitment adverts

    Commenting on the latest ONS market figures, Jonathan Boys, labour market economist for the CIPD, comments:

     “The labour market remains tight. At 3.8% unemployment is incredibly low. However, pay is struggling to keep pace with rising prices. Today’s statistics look backwards but it’s what’s to come that is concerning.  The OBR forecasting that inflation could reach 8.7% this year. The big pay squeeze is still in the pipeline. Employers have a big role to play in supporting their staff through this time. If the ability to award pay rises is limited, employers can look at the total employment offer. This includes designing jobs that include ample flexible working options. Financial wellbeing support can make a difference, as can revisiting the mix of benefits offered to make sure they work hard for employees, especially the lowest paid.” 

    Figures and data sourced from the ONS, CIPD and REC