There’s plenty of pessimism about the UK labour market right now, but not every development is necessarily bad.
With the Autumn Budget still more than two months away and many firms reluctant to act until they see what’s announced, it’s hard to draw firm conclusions.
Even so, the current data offers a clear clue about the current state of the job market and we want to explore those trends and help you prepare your business for this new normal.
Is something wrong with the UK jobs market?
Whether the market is “broken” depends on your viewpoint.
Recent HM Revenue and Customs (HMRC) data shows a steady fall in payrolled employment with a drop of around 8,000 in the latest period, leaving 127,000 fewer people on payroll than a year ago.
That headline number sounds alarming, but it needs to be read alongside other indicators.
Wages are still increasing as the Office for National Statistics (ONS) reports that regular earnings excluding bonuses grew by 4.8 per cent in the three months to July.
That’s slightly lower than the five per cent growth in the three months to June, but it remains a meaningful rise at a time when households are worried about the cost of living.
On the whole, employers appear to be trimming headcount while preserving and in some cases boosting pay for the staff they keep.
That outcome reflects a response to the increased financial pressure that has been faced by many employers in recent times as they have had to absorb higher employer National Insurance Contributions (NICs) and stepped increases in the National Minimum Wage (NMW) and National Living Wage (NLW).
By reducing the number of people on payroll, employers can redirect limited funds to retain key employees with higher wages.
What can your business do if employee costs are biting?
Until the Autumn Budget lands, it is understandable to be cautious about big strategic changes.
In the short term, however, there are sensible steps you can take to manage payroll pressure.
You should make sure you understand your current payroll obligations and have modelled the impact of potential Budget scenarios on cashflow.
We can help you stress-test payroll under different assumptions so you’re not caught off guard.
Alongside this, think carefully about the composition of the team you keep.
Strengthening pay and support for core staff is often a pragmatic way to control overall wage bills while retaining the skills and experience you need.
That does not mean leaving the remaining workforce unsupported as now might be a good time to invest in HR, training and wellbeing so a smaller team can operate effectively and sustainably.
Additionally, exploring how technology can increase productivity could help to alleviate increased pressure faced by smaller teams.
Where extra capacity is required, short-term hires or specialist contractors can plug gaps without adding long-term fixed costs.
We’re working with businesses to manage higher employment costs through smarter payroll planning, benefits reviews and digital efficiency.
If you would like a payroll health check, a workforce-cost stress test or practical advice on restructuring pay and benefits, speak to our team.
We’ll help you balance compliance, competitiveness and the well-being of your people so your business is ready for whatever the Autumn Budget brings.
For help managing your payroll obligations, speak to our team today!
