British employers expect to keep hiring permanent staff in 2016 but are cautious about offering meaningful pay rises, according to a survey from employers’ group CBI.
In its annual employment outlook, the lobby group said some companies are also contemplating price hikes or recruitment freezes to offset higher labour costs from both the introduction of the “national living wage” in April and a new apprenticeship levy.
The CBI has called the changes the most significant interventions in the labour market since Tony Blair’s government introduced the minimum wage and other employment laws in the late 1990s. The business group also reiterated its scepticism over the likely effectiveness of the apprenticeship levy, which was confirmed in George Osborne’s autumn statement.
“We live in an era of significant labour market interventions,” said CBI director for employment and skills, Neil Carberry.
“The UK’s labour market is in fine fettle, though it’s clear that maintaining flexibility is of the utmost importance to employers. Companies are concerned about the apprenticeship levy and view it as a payroll tax, so the CBI is determined to work with the government to ensure that businesses see their money is spent in the best way.”
The CBI’s survey of 342 employers, covering almost 1 million employees, found nearly half – 47% – anticipated the new levy would be “costly and bureaucratic”. But the survey was conducted between August and October, before Osborne confirmed details of the levy at 0.5% of an employer’s payroll, applying to companies with an annual wage bill of more than £3m. The government hopes the levy will help it hit a target of 3m apprenticeship starts by 2020.
Business groups repeatedly complained about skills shortages this year but at the same time expressed reluctance to pay the apprenticeship levy. Carberry said employers surveyed by the CBI had expressed support for the aims of a levy and for funding it, but that there were worries the government wanted to hit targets for a quantity of apprenticeships rather than focusing on quality.
The CBI’s employment survey, conducted with consultancy firm Accenture, reprises the theme of skills shortages, with respondents saying they were the top threat to the UK’s attractiveness as a place to do business for the second year running. The poll cited businesses’ rising concerns over getting the skilled workers they need as the economy heads towards full employment.
More than two in five businesses, or 43%, expect their workforces to be larger in 12 months’ time while 13% expect their workforce to be smaller, according to the the survey. The number of new permanent jobs will outstrip temporary roles, the poll suggested.
In the coming year, more than half of businesses, or 52%, said they intended to raise pay at least in line with the retail prices index (RPI) measure of inflation, which was 1.1% in November. That was little changed from the 55% planning to match or beat RPI in the same survey a year ago.
Asked about the national living wage, which will push up the minimum hourly rate for workers aged 25 or older from £6.70 to £7.20, two-fifths of firms anticipated some impact. Of those employers who feel the national living wage will have an impact, 34% anticipate having to raise prices. More than a quarter, 28%, said they will be employing fewer people as a consequence.
In the services sector, which includes businesses that tend to rely more on cheaper labour such as hotels and retailers, the expected effect on prices is more pronounced. Of those service sector employers who feel the national living wage will have an impact, 51% anticipate having to raise prices, 27% said they would employ fewer people and 18% said they would offset costs through changes to wider reward packages.
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