Labour shortages in the UK; how can businesses stymie the great resignation?

Brexit, COVID-19, and a national skills shortage have created a perfect storm, throwing the labour market into turmoil.

In the three months to March 2022 a record 1.28 million job vacancies were available in the UK, up from 340,000 in the three months to June 2020. At the same time, unemployment rates have dropped below the five-year pre-pandemic average, indicating a tightening of the labour market and a reduction in the number of candidates available to fill vacancies.

Before the pandemic, employment rates in some high-skilled occupations (such as IT and telecommunications) were on the rise, propelled even further by heavy reliance on technology and digital channels during two years of intermittent lockdown. Conversely, lower-paid and lower-skilled jobs have been increasingly difficult to fill; the number of people employed in cleaning positions fell 36% between 2016 and 2021.

London and the Northwest have the highest rate of job vacancies – 31 % and 26% above the national average respectively.

With costs increasing on all sides, it’s more important than ever for businesses to save money where they can. A quarter of UK workers are planning a job move in early 2022, which could translate into substantial recruitment and training costs for businesses needing to fill empty roles. Employee retention could be a huge potential cost saver – one that also promotes higher productivity and business continuity. Research from Oxford Economics indicates that it takes over 6 months for a new hire to reach full productivity, costing a company up to £25,200 per recruit.

Why is the UK experiencing a labour shortage?

There is much speculation to the cause of the shortage, ranging from Britain leaving the EU to pandemic-induced mass resignation.

Brexit and immigration policy

A reduction in overseas interest in UK jobs has been cited as one reason for difficulty recruiting into lower-skilled positions. Freedom of movement between the UK and the EU ended on 31 December 2020, requiring non-UK citizens to have a work visa to find employment in the UK. This means employers wishing to take on these workers require approved sponsor status – increasing the difficulty to both businesses and potential overseas employees.

The latest figures from the Office For National Statistics show in the two years between January 2020 and December 2021 the number of workers in the UK labour force from the EU dropped 11% (from 2.41 million in the first quarter of 2020 to 2.15 million at the end of 2021). The biggest drop has been in those from Eastern European countries, who are traditionally more likely to work in sectors reporting severe shortages (agriculture, food processing, hospitality).

The decline was fuelled in part by the arrival of COVID-19 in early 2020, eliminating time businesses had to adapt to post-Brexit life. Many were prepared to make the necessary adjustments and provide employee training to address a skill mismatch, but these plans were hindered by pandemic restrictions.

COVID-19 and the Great Resignation

The COVID-19 pandemic changed all our lives to some extent, notwithstanding how we approach our work-life balance. Priorities have shifted, and workers are no longer prepared to put long hours and commutes over a nicer life. A 2022 Microsoft survey found that 53% of employees are now more likely to prioritise their health and wellbeing over work than before the pandemic, and over half of young employees are looking to change employers this year – a crazy amount of movement in the job market.

Almost half of UK workers report feeling more prone to extreme stress (the largest proportion within the younger working population). Cases of burnout (resulting from persistent stress at work) are also on the rise.

The Great Resignation, or Big Quit, is a phenomenon that started in the USA in April 2020 and spread rapidly across the globe, as employees looked for more from their jobs. Employees are seeking an abundance of things – better opportunities, promotions, remote or hybrid work, excellent leadership, higher remuneration or benefits packages, and a sense of fulfilment – and move on if current employers are unable to provide this.

The risk of catching COVID-19 itself was the reason one fifth of workers in 2021 left their jobs, according to the 2022 Microsoft survey. The pandemic has increased emphasis on the role employers play in the health and safety of their staff.

National skills shortages

Industry data from the Recruitment and Employment Confederation (REC) show that 65% of recruiters claim skills shortages are a barrier to placing suitable candidates into roles. This hits some industries harder than others. The Department for Education’s latest Employer Skills Survey (2019) emphasised that 24% of job vacancies were related to shortages of skills and most of these were within medium- and high-skilled roles.

HGV driving is a notable example of a job market in difficulty due to a shortage of appropriately qualified drivers. This has been exacerbated by a reduction in the number of EU workers in the sector, and by a change in tax laws removing drivers’ self-employed status, resulting in higher taxes and drivers leaving the profession.

Poor pay and conditions

Paying below market salary or providing poor working conditions is a sure-fire way to lose employees and have a difficult time recruiting.

Although nominal salaries are generally rising (particularly for those receiving the National Living or National Minimum Wage), the increase in average total pay is not line with inflation; the real term increase in salary between December 2021 – February 2022 is below zero when bonus payments are excluded. The 2022 cost-of-living crisis is adding strain to many households already stretched: an uncompetitive salary could be the force driving employees to look elsewhere.

How can businesses combat the mass exodus?

Sir Richard Branson once said, “Your employees are your company’s real competitive advantage. They’re the ones making the magic happen – so long as their needs are being met.” Good employees take care of clients and customers, which ultimately boosts profitability through a higher spend per customer and new customers gained through good reputation; ESG initiatives (including respectful treatment of the workforce) are being noticed by customers and investors. Retaining top talent is vital, and addressing their needs is key to keeping them.

Competitive salary

Though salary increases add further cost to a business, ensuring pay is in line with market salary for a specific role and location could cost less than a new hire (who often demands an even higher wage and requires additional training). Ultimately, the reason most of us go to work each day is to earn money, making salary uplift a very straightforward way to keep employees who are otherwise happy in the job.

Alternatively, an improved benefits package, or giving employees the opportunity to choose benefits relevant to them could give an edge over competitors: a Glassdoor survey found that 80% of workers would prefer better benefits over a salary increase.

Hire the right people

The Great Resignation has prompted rapid hiring to fill roles left by those leaving en masse. The result is hasty recruitment processes and allocation of candidates into roles that they aren’t best suited to. Research from Right Management suggests over four fifths of UK employers admit to having employees in unsuitable roles. This will inevitably lead to retention problems, as these employees struggle to fulfil the role requirements.

Staff training

This is not necessarily a quick solution to shortages – for example, nurse training takes several years.

But providing staff training promotes career progression and could help in the longer-term to fill vacancies currently open due to lack of appropriate skills. It also creates a sense of value in the employee, recognising the investment their organisation is making in their professional development.

Better scheduling

Many companies use a flexible scheduling system to align staff levels with demand. This often means workers are expected to work shifts at short notice and might not be allocated enough hours to meet their financial commitments. While this seems to make financial sense for the companies in question, it is detrimental to both them (higher employee turnover and recruitment expense) and their employees (financial strain, stress, childcare issues, and lower job satisfaction).

Improving stability using a rota published well ahead of time improves employee performance.  Gap (the clothing chain) saw a 5% increase in productivity driven by a 3% rise in sales on the introduction of a responsible scheduling system.

Provide a good role model

Managers are role models to other employees; they drive the culture of an organisation and advocate for their team. Remote work during the pandemic has been a challenge for managers, left to oversee staff scattered all over the place with little face-to-face contact. But these are the people who best know the workforce; with appropriate training they should be trusted by higher forces to make decisions in the best interests of their colleagues.

Mindfulness in relation to self-care reduces stress and burnout; management must set a good example to other employees by avoiding unhealthy work behaviours, setting a precedent that other employees should do the same.

Encourage healthy work-life balance

Employee education on the signs and symptoms of stress and an offer of support to those struggling could tackle issues before they escalate into full blown burnout. Resilience training is offered by many organisations as part of a strategy to address rising levels of burnout.

The popularity of remote and hybrid work is on the rise and facilitating this for employees could really improve their work-life balance. Time can be better spent with families and pursuing hobbies, that would otherwise be lost on a commute, which months of remote work has proven is completely avoidable for many.

It is easy for employees to become inundated with work. Regular monitoring of workloads to ensure they are achievable within contracted hours can take the pressure off, resulting in happier, valued workers.

Final words

It can be tempting to cut corners when it comes to filling job vacancies, but short-term solutions often leave underlying issues unaddressed and ultimately end up costing businesses. The labour shortage has intensified following recent challenges and doesn’t look set to ease just yet.

Employee priorities have changed dramatically over the last two years, and businesses must reflect on their approaches to salary, health and safety, staff training, and employee wellbeing in general to prevent the most valued members of the workforce walking out the door.

Sources

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