A time for retention
23 August 2021
In May we wrote of the increased importance of employee retention for UK employers as the economy began to reopen.
Just three months later and it appears that – for the moment at least – that the retention need has increased significantly.
In the last few weeks there has been much evidence of the jobs market becoming far more difficult for employers.
In July the national media began to report of “joining bonuses" being offered to new candidates in some sectors.
And last week it was reported that UK job vacancies had reached a record high, alongside the news from the Office for National Statistics (ONS) that average earnings had increased by 8.8% for total pay, and 7.4% for regular pay in the last year.
Just a blip?
Of course all of these findings might only be a temporary distraction, caused by the economic roller-coaster than the nation (and indeed the world) has been travelling on for the last 18 months.
“The standard advice given when looking at monthly statistics is to not focus too much on the short-term changes – which are often volatile – but rather on the longer-term trends”
But regardless of whether these issues are short-term corrections or longer-term trends, the reality is that right now, in the early autumn of 2021, recruitment and retention is a real challenge for employers in many sectors, and one that has the potential to slow the bounce-back of individual organisations and indeed the wider UK economy.
Longer term issues?
It should also be noted that many of the above indicators might not be simply post-pandemic corrections.
Indeed the ONS chart of wage growth (below) provides clear evidence that the increase in wages is part of a steady improvement over time, notwithstanding the short-term intervention of the pandemic on the figures.
And likewise it should also be noted that the pandemic is only part of the candidate shortage issues currently being experienced.
Whilst its certainly true that the lockdowns have forced many workers to retrain and start work in other sectors, the impact of Brexit can’t be overlooked either. The statisticians will never be entirely clear as to how many EU nationals have left the UK to return to the financial and emotional suppport network of their families, but estimates of around 1 million workers may not be far off the mark. Such a rapid migration of talent clearly has consequences for the UK right now.
Of course at the time of the Brexit referrendum the concept of a global pandemic was not on anyone’s radar, and in any case it was probably assumed that any employment shortage could be made up from the UK’s long-term unemployed and the (so called) “economically inactive” demographics. And this may still be the case, although at the moment it appears that the number of people voluntarily leaving the employment market (particularly to take early retirement) might have actually increased during the pandemic.
It was also to be expected that workers from nations outside of the EU would migrate to the UK post-Brexit. This will doubtless happen at a later date, but is unlikely to begin whilst the pandemic persisits worldwide, and even then will take some time to make a meaningful difference to the UK's employment landscape.
Of course many (or perhaps all) of the above challenges might yet be offset by the ending of the Coronavirus Job Retention Scheme. In June the scheme was still supporting an astonishing 1.9 million jobs, and the sad truth is that some of those roles just won’t exist come the end of the scheme in October. As a result many more candidates may yet flood onto the jobs market.
Yet even those new candidates may need to retrain and acquire professional qualifications before they can help reduce the UKs current candidate shortage. And even then there may be a significant delay until such workers can reach their optimum productivity (as evidenced by this research back in 2014).
So the reality is that many employers might well be facing a candidate shortage for at least the remainder of 2021. And with far fewer quality candidates currently available, the onus for employers may now rest firmly on worker retention.
So how can employers improve this key statistic?
A good initial step would be for Human Resources (HR) departments to remind line-managers of the business case for good employee retention.
Just as importantly HR departments should aim to equip line-managers with all the collateral and tools needed to reinforce that retention messages with employees. This should include a reminder of the benefits of continued employment, and an indication as to likely career progression prospects as well.
Lastly, but certainly not least, HR should highlight to line managers the benefits of continuous employment.
The potential lessening of some employment rights in the first two years of a new employment is often not widely understood, and is perhaps far more important when the UK still faces the continued threat and uncertainty of another COVID-19 winter ahead.
And likewise a change of employer could result in the loss of cover provided by some really valuable (but often overlooked) Employee Benefits offerings.
The health-crisis of the last year has demonstrated just how important items such as Group Life Assurance, Group Income Protection and Group Private Medical Insurance are in protecting employees and their families, and a break in this cover is perhaps even more concerning given the continued global pandemic.
The reality is that it is in the employer’s interests to make the case for employee retention both clearly and regularly. And right now this should be a high-priority task for many more employers.
For more information on any of the above topics, please speak to your usual Howden Consultant in the first instance, or visit our website for other contact options. For the latest details on COVID-19 & Employee Benefits provision please visit Howden’s coronavirus hub.
Steve is Head of Benefits Strategy, Howden Employee Benefits & Wellbeing, and is an award-winning thought leader on Pensions, Employee Benefits, and Human Resources issues. He is occasionally accused of making Employee Benefits interesting.