Employers struggle to close the pay gap.
Despite a drop in inflation, employers are still finding it difficult to close the gap between basic slurry and the cost of living.
Last week it was announced that inflation dropped to 3% in April, the lowest for more than two years, however a survey by the CIPD found that 51% of companies are unable to predict whether salaries will even rise over the next 12 months, let alone increase in line with inflation.
The Labour Market Outlook showed pay award expectations over the last three months have fallen from 1.7% to 1.5% – just half the current level of inflation.
Perhaps surprisingly, it is private sector firms which are least certain about their ability to give pay increases over the next year. 21% of employers surveyed have already decided to postpone pay decisions until next year.
Among those companies that have been able to forecast a pay rise, the average award is below inflation at 2.6% and the main causes for the expected increase are affordability (62%), inflation (55%) and employee productivity and performance (52%).
Charles Cotton, rewards advisor at the CIPD, comments: “Our data shows that many employers are keen to raise pay in line with inflation but are struggling to close the gap as inflation remains stubbornly high. Line managers and HR professionals need to look at how they can continue to keep employees engaged and performing well in the absence of substantial pay rises, while at the same time limiting the impact of financial distress on employees by offering financial education, debt counselling and voluntary benefits packages.”
Olympic boost for temp positions
With the London 2012 Olympics now just two months away, there are expectations of a huge rise in the use of temporary agency workers. Whilst they are commonplace in businesses that naturally have peak periods, such as retail and tourism, the games will mean companies unused to contingent workforces will be reliant on them to meet demand.
Businesses planning to use temporary agency workers to cope with a rise in demand during the Olympics must make sure they fully understand the Agency Workers Regulations.
The duration of the games means many workers will only be employed for a few weeks, much less than the 12-week qualifying period. But, the regulations have an impact before the qualifying period expires. Whilst many larger employers who use temporary agency workers year-round will already have the processes in place to deal with the regulations, those anticipating a high demand purely during the Olympics may fall foul.
Under the regulations there are ‘Day One Rights’, which, unsurprisingly, a temporary agency worker is entitled to from their very first day. These include access to shared facilities and amenities or services, such as crèches, canteens and transport services, and information on job vacancies.
For further information on the rules, please see our Agency Workers Regulations website.
Underemployment and its impact on workforce politics
Underemployed (adjective) 1.employed at a job that does not fully use one’s skills or abilities.
2. employed only part-time when one is available for full-time work.
3. not utilized fully.
The unemployment rate dropped in the last three months, but figures show that the rise in part-time and temporaryworkers has been significant. There are now 1.4million people ‘underemployed’ in the UK; that is that they are working, but not in a role which is insufficient in some way to the workers, for example pay, hours or skill-level.
Whilst some work is obviously better than no work, the strain underemployment puts on workers and their families is pronounced. The phenomenon is gripping across the market too – whereas many would expect women to be part-time workers, the latest figures show that 645,000 men are now working part-time. Many people are finding the need to work multiple jobs to make ends meet, not only is this a risk to their health, but it’s also a concern to employers as productivity levels are likely to drop.
The impact on workforce moral and politics is, unfortunately, a hugely detrimental one. Although employees are choosing to work on a part-time or temporary basis over relying on Job Seekers Allowance, there is still likely to be a level of resent, especially toward those who are employed on a full-time basis or in desirable positions. HR Managers have an increasingly difficult job to maintain moral in an underemployed workforce, at the same time recognising underemployed talent that could benefit the business if better utilised.
According to the TUC, involuntary part-time work has risen quicker than unemployment since the start of the recession. During this period, the number of men in this position has risen by more than 115%. And nearly a third of young people in work are having to do part-time hours, even though they want a full-time job.
Home working: The employees prospective
Yesterday we took a look at the Employers side of home working; today we’ll explore the workers prospective.
Any employee would love the opportunity to roll out of bed, make a cup of tea and settle into work in their pyjamas. Unfortunately it isn’t possible in all industries, retail and manufacturing being obvious examples.
In those industries where it is a viable option there can be a number of advantages for employees. The time and cost of commuting is completely eradicated, leading to a less stressed workforce, this also allows for staff to be more flexible with childcare. Research has shown that staff are less likely to take sick leave if they can work from the comfort of their own home and firms have also found that they are more productive.
Flexible working, which can include home working, is of a huge benefit to carers as it provides them with an opportunity to work when they may not otherwise be able to. Employers can see huge skills benefits from this type of worker too, as they are often given no choice but to stop working despite strong career prospects.
As with anything there are some disadvantages, even from the employees point of view. Autonomous working can be lonely and without the ability to quickly get answers or bounce ideas off colleagues workers can become stale and opportunities for promotion or training may be missed. It is also very easy for workers to get distracted, especially if they do not have a designated ‘office’ space.
Home working: The employers prospective
The Olympics and the impact it may have on commuting have meant home working has become a hotly debated topic lately.
Household names such as O2 have trialled schemes to ascertain whether it would be a suitable solution to the hurdles the games bring. The results were hailed an ‘astonishing success’ with the pilot ‘saving staff 2,000 hours’. According to People Management, “More than 2,500 staff based at O2’s Slough HQ – a quarter of its 12,000-strong workforce – worked away from the office on February 8th, with only 125 “mission critical” staff left in the building.”
Perhaps rightly so, many employers are cautious about allowing staff to work from home. It is certainly not right for all businesses, but it worth considering the pro’s and con’s so that if, in future, there is a need to implement a home working scheme you can be prepared.
Pros:
- Infrastructure: Often working from home requires some significant set-up costs. If employees currently work on desktops, investment in laptops will be needed. Then there is other equipment that may need to be taken home and the associated insurance costs, not to mention the implementation of a VPN so that intranets can be accessed from outside the office.
- Dividing employees: In most workplaces there will usually be a number of employees who are unsuitable for home working, this can cause tensions and divisions in teams and may be bad for moral.
- Productivity: Employers main concern in home working is that staff will not actually work. It can be difficult to monitor output levels and discipline those who choose not to work.
Cons:
- Happier workers: Without the stress of commuting workers are often much happier and as a direct result of not having to commute, starting work earlier is often the norm. The associated costs of getting to work, childcare etc are also negated making employees less likely to request a pay rise.
- Reduced overheads: Although initial investment is required, overheads will be reduced due to the depleted amount of workers in the office. Even simple things like tea and coffee costs could prove a significant cost saving.
- Communication: When employees cannot converse directly they are likely to communicate better and only communicate the things the need to. Whilst this may be a slight impact on email capacity, it means there will be a paper trial for everything rather than an awkward situation of ‘they said that’.
The workforce ratio: Temporary vs permanent – striking a balance
Temporary agency workers are now a vital role in UK businesses, however they can still be a controversial point too.
Over the last year there has been a number of examples where businesses have laid off hordes of permanent staff only to replace them shortly afterward with a temporary workforce. Whilst to many businesses this makes complete sense ensuring the right balance between temporary and permanent staff is crucial.
It goes without saying that every business is different and has different needs, so there is no ‘perfect model’ when it comes to workforce ratio; but there are certainly some considerations to be made.
1. Activity level
– Temporary agency workers are exceptionally useful in businesses that experience pronounced fluctuations in demand. For example warehousing, where orders may peak during January sales, periods of good weather and then again toward Christmas. It can prove costly to employ a permanent workforce that is big enough to cope with demand, but is largely dormant throughout the year. Therefore using temps for short periods of high activity makes sense.
2. Skill requirements
– It is difficult to find highly skilled workers in certain industries; so temporary agency workers are an ideal way to plug skills gaps and to enable businesses to complete projects. However, it is worth noting that skills which are in high demand command a much higher wage than most and therefore it may be worthwhile searching for a permanent employee with the right skills rather than taking on the temporary worker for a prolonged period.
3. Local employment trends
– High unemployment in an area means a bigger pool to employ from. This means putting together a contingent workforce at short-notice should not be difficult, dependent on the skills required. Conversely if unemployment is low it may be difficult to source temporary staff and therefore permanent employees may be the option.
4. Costs comparisons
– The flexibility of a temporary agency worker and the outsourcing of recruitment to agencies can make them a cost effective solution. However, if the position requires investment in training, equipment or personnel checks it could make it less so. Other cost implications to consider are the comparative salaries. Often the ‘going rate’ for a temp maybe different to the equivalent permanent rate.
5. Moral effects
– As highlighted earlier, there have been a number of cases recently where permanent staff have taken umbrage to their hours or entire jobs being replaced by temporary agency workers. Unfortunately, temps can be a source of negativity in a workplace and it is important to consider what the moral impact of changing the workplace ratio might be.
How can job vacancies be rising as well as unemployment levels?
Figures show job opportunities’ steadily growing, year on year, yet unemployment figures are looking less healthy and the economy has entered negative growth. So, how can it be that there are more jobs available yet more people without them?
The main issue is that the opportunities are rising in a select few sectors and often in those with skills shortages. The majority of sectors are seeing a decline in positions. The Reed Job Index found a 7% increase in vacancies in April, compared to last year, but the only sectors to actually see an increase were the highly skilled ones, such as Engineering, IT and Accountancy Qualified.
Sectors such as these are currently driving the UK economy, however in order to combat current levels of unemployment investment is required to either train the unemployed and plug skills gaps or create more opportunities in less skilled sectors.
For more than half of the sectors examined in the report April figures showed a decline and compared to March vacancies fell across all regions of the UK; however this has been attributed to the Easter break. Martin Warnes, managing director of reed.co.uk, explains: “While the Easter holidays led to a disjointed period for UK business and a slowdown in job creation, the number of new opportunities available in April was 7% higher than the same point last year, following a steep increase in the first quarter.”
The temporary recruitment market remains resilient
Two reports released today reveal just how well the contingent workforce market is coping with the negative economic climate and the Agency Workers Regulations (AWR).
According to the REC the market is holding up well, despite recruiters reporting increasing costs due to the AWR. Their figures showed a slight ‘blip’ in figures in January, partly attributed to a rise in permanent hires. Speaking to HR magazine, Tom Hadley, director of policy and professional services at the REC explained:
“If you look at other EU markets that implemented the regulations before the UK, they experienced blips too, but ultimately had stronger temp markets than before the regulations came in.”
A separate report from Venn Group shows that the usage of temporary agency workers has increased by a third in the first quarter of 2012. They found that the industry has ‘experienced an upswing’ in the commerce industries, financial services and, perhaps surprisingly, the public sector.
The study found that the North of the country is seeing the largest rise in demand. The North West increased usage by 61%, the Midlands by 59% and the North East by 48%.
London’s increase was 36%, unsurprisingly attributed to the Olympics.
The career temp – job for life mentality gone
Once upon a time, in a land not so dissimilar to this, jobs were for life. People trained in a trade and stuck with it, often with the same company for the majority of their working life. So, what happened?
The job for life mentality has largely disappeared; job development and work/life balance are among the reasons for this, coupled with a fragile economy and the simple fact that people get bored much quicker.
Taking this to another level are ‘career temps’. Over the last few years, opportunities for permanent work have been hard to come by, and many experienced workers have been forced to take a pay-cut in order to continue in their chosen field. Others have opted for project based, temporary work, which ensures their pay remains adequate but has a limited contract length.
There are over a million temporary agency workers employed at any one time and they range from litter pickers to lorry drivers and receptionists to interim managers. Those in more skilled careers have found that there is a lot to be said for temporary agency work, the skills and experience they gain is second to none. Their projects can change from one week to the next, yet they have the flexibility to work when they want, and pick and choose the work they want to do. Whilst those in less skilled sectors have the freedom to work multiple jobs at once in order to remain financially stable as well ensure personal growth.
‘Career temps’ can carve a niche for themselves by focusing on areas with significant skills shortages, ensuring they are a vital cog in business needs and allowing for contract negotiation and financial gains.
The experience gained over short periods of time allows ‘career temps’ to move up the ladder often quicker than permanent equivalents. Employers recognise the experience temporary agency workers bring meaning they require minimal training and can ‘hit the ground running’, saving on initial employment costs.
Not only have businesses benefited from this trend, but recruitment agencies too. The nature of a short-term contracts mean recruitment agencies are constantly on the look out for a temps next position and, provided they keep their employee happy, they are likely to be the source for new work each time a contract comes to an end.
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Is diversity the next green?
Green supply chains and eco-friendly procurement have been hot topics for years now and many firms are selecting their suppliers and partners based on their ‘green’ credentials. But could the next big thing be diversity?
Yes, many would argue diversity has been and continues to be a key issue for HR professionals, but if ‘true diversity’ becomes a key selling point in your business, much like your green credentials, how would you fare?
Often retaining minorities is more difficult than recruiting them. This is especially true for companies in less diverse regions where minority employees may feel disconnected. HR professionals may find the need to adapt workplace culture in order to accommodate.
Whilst all of this sounds expensive, a diverse workforce has many bottom-line benefits. For example, companies with more women on their boards outperform their rivals with a 42% higher return in sales, 66% higher return on invested capital and 53% higher return on equity.
A recent article in HR Magazine highlighted “The standard 12 point plan-style argument for diversity:
Now the key is how to move from here to there…
May 24, 2012 Posted by depoel | de Poel Comment, HR, Procurement | Leave a comment