Demand for temporary workers in the UK softens
The number of temporary employees in the UK fell by 3.7% on a seasonally adjusted basis to 1.52m n the three-months from January through to March 2019 when compared to the same period a year ago, according to official figures.
The Office for National Statistics reported that the number of temporary employees as a percentage of total employment was 5.5%, down from 5.8% compared to the same period a year ago. Compared to the previous period ended in January 2019, the number of temporary employees also saw a decrease of 1.1%.
Of the 1.52m temporary employees during the period ended March 2019, approximately 387,200 were temporary because they could not find a permanent job; 451,000 did not want a permanent job; 131,000 had a contract with a period of training; and 558,800 cited other reasons.
The report also found that despite rising recruitment and retention pressures, median basic pay expectations in the 12 months to March 2020 remain at 2%. However, pay expectations have fallen back in the private sector from 2.5% to 2% and have risen in the public sector from 1% to 1.5%.
UK unemployment hits 45 year low
Official figures show that unemployment in the UK is at its lowest level for 45 years. The Office for National Statistics (ONS) said the number of people out of work in the past three months has now been falling for five years and is now at 3.8% – lower than at any time since the end of 1974. Employment also jumped by 99,000 in the three months to March, to 32.7m with the number of people working now the highest on record at 76.1%.
The number of people in work continues to reach near record levels as fewer women retire between the ages of 60 and 65, new figures reveal. Unemployment fell by 65,000 to 1.3m, continuing a general trend which started in early 2012.
Average earnings increased by 3.2% in the year to February, compared with 3.5% on the previous month while the number of economically inactive people in the UK fell by 23,000 in the latest quarter to 8.6m, a rate of just under 21%, one of the lowest on record. The number of vacancies fell by 16,000 to 846,000.
The UK’s employment rate of 76% is at a joint record high, while for women it has reached the highest on record at 71%. The increase is partly due to changes in the state pension age for women, resulting in fewer retiring between the ages of 60 and 65, the ONS said.
The number of people in work has increased by 354,000 over the past year, entirely due to full-time employment. Part-time working fell by 18,000 to 8.5m, while self-employment increased by 180,000 to just under 5m.
The UK labour market remained robust in November according to the latest figures from the Office for National Statistics (ONS) with the number of people in work reaching a new high of 32.54m.
Significantly, the data also showed a sharp increase in average earnings, (including bonuses) which rose 3.4% y/y, the biggest increase since July 2008 and higher than October’s 3.3%. Adjusting for inflation, which fell to 2.3% in November, average pay increased by 1.1% in real terms.
Unemployment was flat, with a small increase of 8,000 between September and November for a total of 1.37m with the number of job vacancies up 10,000 to 853,000. The unemployment total is 68,000 lower than a year ago, with the jobless rate 0.2% down on this time in 2018.
ONS head of labour market David Freeman said: “The number of people working grew again, with the share of the population in work now the highest on record.
“Meanwhile, the share of the workforce looking for work and unable to find it remains at its lowest for over 40 years, helped by a record number of job vacancies.
“Wage growth continues to outpace inflation, which fell back slightly in the latest month.”
Howard Archer, the chief economic adviser to the EY Item Club, said the increase in earnings growth indicated that the “tight labour market is pushing up pay – after suffering a relapse earlier in the year”.
But he warned that while employers were increasing pay to recruit staff during a period of skills shortages, workers already in a job were finding it more difficult to secure an inflation-busting rise.
UK businesses remain concerned about the UK’s future outside the EU and caution that it could lead to lower economic growth, according to a report by the ICAEW.
The survey found that 69% of senior business professionals, who are also chartered accountants, expect uncertainty surrounding the UK relationship with the EU which could affect them negatively. Of the 501 people surveyed, 67% fear lower UK economic growth will hurt their business, while 63% fear a slowdown in the global economy.
UK firms are being squeezed by labour shortages, rising prices and a slowdown in sales, according to a report from the British Chambers of Commerce (BCC).
More companies than ever before are finding it hard to recruit staff with four fifths of employers in manufacturing, and almost as many in the service sector, reporting difficulties in finding the right workers.
Dr Adam Marshall, Director General of the BCC, said these findings suggested the government should listen more closely to business when it came to drawing up its migration policies.
“Business concerns about the government’s recent blueprint for future immigration rules must be taken seriously – and companies must be able to access skills at all levels without heavy costs or bureaucracy,” he said.
The BCC also said that the lack of clarity over the process of leaving the European Union had led to stagnating growth and business confidence in the UK.
Suren Thiru, Head of Economics at the BCC, said the UK economy was facing “persistent Brexit uncertainty and rising cost pressures”.
He added that subdued household spending levels and tightening cash flow was making it hard for businesses, particularly in the services industries to grow.
However he said that upward pressure on prices from higher wage settlements remained relatively muted.
The BCC’s survey covers 6,000 firms, employing over one million people across the UK.
The latest KPMG/REC report paints a bright picture of the UK jobs market. The report for October showed that the number of people placed into permanent jobs in the UK rose at a sharp and accelerated rate, with the rate of growth the second fastest since March. At the same time, billings for temporary staff expanded at the fastest pace since May.
The survey reported continued strong demand for permanent staff within the UK labour market although it did note that the rate of growth was restricted by candidate shortages. On the temp side, an inability to find candidates for permanent positions was cited as a reason for robust demand.
Although job vacancies expanded at the softest pace for nearly two years in October, growth of demand for staff remained historically sharp at the start of the fourth quarter. Starting salaries continued to rise sharply in October, with the rate of inflation holding close to September’s 41-month record. Hourly pay rates for temporary staff also increased markedly, despite the rate of growth edging down to the least marked since March.
Commenting on the latest survey results, James Stewart, Vice Chair at KPMG, said:
“Whilst Brexit may be dampening overall business investment, firms continue to hire new staff at near record rates. With the jobs market so heated, businesses across the country, of all types, are struggling to find work ready staff. A four-decade low in unemployment and a dwindling supply of EU workers means good candidates are at a premium. Consequently, we’re seeing wages pushed upwards and a trend of canny workers job hopping to secure a pay rise rather than remaining loyal to their existing employers.”
APSCo reports strong increase in permanent placements
The Association of Professional Staffing Companies (APSCo) has reported a strong increase in the number of candidates securing permanent roles in July. APSCo’s research, which focuses on professional recruitment, showed a 10% increase in July although there were notable differences by sector.
While permanent placements within IT and financial services increased by 33% and 10% respectively over the 12-month period, the number of marketing professionals securing permanent roles during this time slipped by 11%. Meanwhile, vacancies for permanent staff, meanwhile, fell by 3% in July 2018. At the same time, demand for contractors also slowed down with vacancies decreasing by 7% across the board, signalling a slowdown in demand for talent.
APSCo added that the number of contractors out on assignment in July 2018 was 15% lower than the previous year. Despite this overall decrease, the contract market within financial services remains strong with demand for non-permanent professionals up 27% year-on-year across the sector. The number of finance contractors out on assignment increased by 3% in July 2018.
APSCo said that this strength is likely to be attributed to Brexit uncertainty, with some firms hesitant to increase permanent headcount until there is more clarity around service exports once Britain leaves the union.
Meanwhile, the most significant swing in hiring activity can be seen within the IT sector, where the number of contractors out on assignment plummeted by 33% year-on-year in July 2018. Permanent placements within the sector, meanwhile, increased by the same percentage over the same period.
John Nurthen, Staffing Industry Analysts’ Executive Director of Global Research commented, “While our survey detects year-on-year weakness in placements and vacancies for temporary jobs, the general labour market shows signs of health, with 32.4 million persons employed and total job vacancies up 6.6% to reach 829,000.”
Ann Swain, Chief Executive of APSCo, also commented, “While overall hiring activity remains strong, the current climate is certainly creating interesting activity in the market. Britain’s exports of financial services to the European Union hit a record high last year, and although firms need talent to meet demand, many are understandably reluctant to bring on board permanent talent.”
HMRC has cautioned that some people employed through agencies and umbrella companies who sign up to arrangements that claim to save them tax, could be in effect tax avoidance schemes.
HMRC warned that most employment agencies and umbrella companies operate within the tax rules. However, some umbrella companies and agencies promote arrangements that claim to be a ‘legitimate’ or a ‘tax efficient’ way of keeping more of your income by reducing your tax liability.
These arrangements leave you at risk because you are ultimately responsible for your tax affairs and for paying the correct amount of tax and National Insurance contributions.
These types of arrangements are likely to result in you paying additional tax, interest and perhaps penalties, and are never HMRC approved.
These arrangements may work in different ways, but the companies that use them claim they will help you keep more of your income and reduce your paperwork.
They will tell you that the payment is non-taxable because it doesn’t count as income as it’s a loan, credit, or something similar. These payments are actually no different to normal income, and tax and National Insurance contributions are payable.
The company may tell you that you have to sign up to these arrangements if you want to work for them. If they do, you should seek independent professional advice so that you fully understand the options available to you.
HMRC cautioned that arrangements like these that claim you pay less tax are extremely high risk and said it will always challenge tax avoidance schemes. If you are involved in an arrangement like this, you’re highly likely to be avoiding tax and you could end up paying additional tax, National Insurance contributions and interest. Penalties may also apply.
In summary, HMRC advised that any individuals should get independent professional advice if you’re not sure whether you are involved in this type of tax arrangement.
UK unemployment fell by 65,000 to 1.36m in the three months to June according to figures from the Office for National Statistics (ONS), the lowest for more than 40 years.
Wages, excluding bonuses, grew by 2.7% in the three months to June, compared with a year ago. The ONS figures also showed the number of European Union nationals working in the UK fell by a record amount.
The unemployment rate fell to 4% in the quarter to June. That was the lowest since February 1975 and better than the figure expected by economists. The drop came despite a smaller-than-expected 42,000 increase in the number of jobs created over the three-month period.
On productivity, the ONS also said output per hour worked was up by 1.5% – the biggest rise since late 2016. The figures also showed 104,000 people who were employed on “zero-hours” contracts, which do not guarantee a set number of hours per week, left such work. That left 780,000 people with those conditions as their main job.
It also said the number of people aged 16 to 64 who were not working, looking for work or available to work – what is known as “economically inactive” – increased by 77,000 from the first quarter of the year.
The latest IHS Markit jobs report for July (sponsored by the REC) shows that job vacancies expanded at their quickest rate since last November. Growth was led by the private sector, with demand for both permanent and temporary workers continuing to rise at rates that comfortably outstripped those seen in the public sector.
Permanent placements continued to rise sharply in July, though the rate of expansion was the softest recorded since last October. Temp billings also increased strongly, with the rate of growth picking up from June’s recent low.
Recruitment agencies indicated that candidate shortages weighed on permanent staff appointments. Notably, the supply of both permanent and temporary candidates fell sharply in July, despite rates of decline easing to the weakest in three months in both cases. Low candidate availability and robust demand for staff led to a further steep increase in salaries awarded to permanent starters. At the same time, temp pay rates rose at a marked and accelerated rate that was close to April’s two-year record.
Sophie Wingfield, Head of Policy at REC noted that despite the recent rise in interest rates that employees may be starting to see the benefits of rising salaries: “The rise in interest rates for only the second time in a decade may leave some people feeling the pinch. But a new job is one way people can ease the burden on their finances. With our data showing starting salaries continuing to rise, the latest official government figures suggest that we are finally seeing the effects of a tighter labour market feed through to pay.”