The UK’s recovery is dipping; how do we combat the skills shortage?

It’s the first time that employment has fallen since 2013. In March – May 2015 there were 30.98 million people in work; 67,000 fewer than in the period December 2014 to February 2015. This leaves 1.85 million unemployed people across the UK. This doesn’t necessarily mean that the upward trend in employment we have come to expect is on its way out, but it seems it can no longer be taken for granted.

However, as 74% of UK employers plan to recruit more permanent staff over the next three months, hopefully this dip in the economy in the last two months is a temporary glitch. In fact, Markit’s recent research shows that ‘new product developments, investments in additional capacity and expansion into new markets’ will boost growing support for businesses over the next year. In the private sector at least, employment is expected to grow as more people are hired to tackle rising workloads.

Amidst growing concerns over the UK’s EU referendum and government spending cuts, there is one particular obstacle to employment growth which is proving to be a persistent thorn in our sides. The skills shortage is one of the most urgent problems in the labour market today, yet is perhaps the least ‘quick-fixable’, preventing any significant hiring until training and development catches up. At the moment, a great many businesses are operating at a very high volume, yet 96% have declared that they have ‘no’ or only ‘a little’ surplus capacity to manage any further increase in demand. For the REC’s Chief Executive, Kevin Green, “it’s concerning that instead of meeting this challenge the government is making it harder for employers to bring in the people they need from overseas with the proposed changes to Tier 2 visas”.

But beyond recruiting more, there needs to be a focus on developing staff internally. Three-quarters of employers, according to Personnel Today, worry that there is a skills gap between their current employees’ competencies and what is needed for them to succeed in the future. Not only does L&D raise and adapt an employee’s skills, but it also acts as a strong retainer. It encourages employee loyalty because it shows an employee that they are care about their learning and shows they want to upskill them to take on more responsibility and broaden their scope and capabilities. We must remember that the multitude of ‘underskilled’ workers are, most likely, more than happy to learn and to become more valuable to their organisation. We all want a more stable labour market with minimal unemployment, and if we don’t have the skills to make it happen yet, we certainly have the ability to grow those skills from our current capabilities.

Applying for a job? We've got you covered.

With competition for job roles fiercer than ever, it’s no longer enough to just have a slick CV; they lack personality and fail to mention why you should be hired. This is what a cover letter is for!

Cover letters create a great first impression, are well constructed, grammatically flawless and support your CV. It’s your opportunity to display your most relevant skills and demonstrate your motivation and enthusiasm for the job and employer.

Your cover letter should be short and to the point. A maximum of five short paragraphs on a page should be enough to get your message across. It’s always tempting to write pages and pages but employers are more likely to be put off than impressed, they want a snapshot of who you are.

Before you put pen to paper, do your research. While it may be tempting to create a template cover letter for all applications, don’t; employers can spot a generic cover letter a country mile off - it’s essential that you tailor each one to the role. Find out what the company does, what work they’ve done, who their customers are; then convey what you know in your cover letter.

Beginning

Include the company’s address at the top of your cover letter, just as you would if you were sending a formal letter. Try and find the name and title of the person responsible for the role, this will make the letter far more personal and demonstrates your initiative.

Middle

The first paragraph or two should be about you. Tell the employer why you are well suited to the role, referring directly to the job description and concentrating on how you have the skills and abilities to excel. Mix evidence of relevant skills and knowledge with work experience examples and personal skills.

The next paragraph should explain why you are interested in the job and the company. What is it about the employer and job role that made you apply? This is your opportunity to target your cover letter so that the employer knows you are interested in their job and you’re not mass emailing ready-made CVs and cover letters to everyone under the sun.

End

The closing paragraph should be strong and clear. Reaffirm your suitability for the role and your enthusiasm about working for the company. State that you look forward to hearing from them and are happy to provide any further information.

Before you send anything, it’s a good idea to ask someone to read it over; it’s always useful getting a second opinion as they may think of good points that slipped your mind.

Finally, the last piece of advice is this….Don’t give up! Employers are often inundated with applications so don’t be disheartened if they don’t get back to you, it’s almost certain this will happen but the key thing is to stay proactive.

UPDATE on the Budget & Recruitment; 'it's a taxing thought.'

Two key areas in particular from the recent Budget affect the recruitment sector, and those in the recruitment supply chain.

1.    ‘IR35 / Intermediaries Legislation’

The Budget announced the start of a dialogue between HMRC and stakeholders on the best way to reform IR35 legislation, with the Government wanting to find a solution that protects the Exchequer and (in their words) improves fairness in the system.

Whilst the Government recognises that many individuals choose to work through their own limited company, where people would have been employees if they were providing their services directly, anti-avoidance legislation commonly known as IR35 (introduced in 2000) requires that they pay broadly the same tax and National Insurance as other employees.  As highlighted by reports from the Office of Tax Simplification and the House of Lords, the Government believes IR35 is not effective enough, with non-compliance in this area estimated to cost over £400 million a year.

2.    Travel and subsistence

The Government intends to consult on detailed proposals to restrict tax relief for travel and subsistence for those working through an employment intermediary and under the supervision, direction or control of any person. 

A twelve-week consultation was launched 08 July 15 (changes intended to take effect from 6 April 2016).  The intention of these proposed changes is to prevent temporary workers employed through employment intermediaries, and their employers, from benefiting from tax relief for home-to-work travel expenses; relief is not generally available to other workers employed directly or through temporary work contracts.

A series of round tables are being planned by HM Revenue and Customs over the summer, in order to facilitate dialogue, improve understanding of the proposals and to help develop responses to the consultation.

The consultation is very similar to the Onshore Employment Intermediaries Consultation, proposing the use of the same supervision, direction and control tests.  Where the worker is subject to the right of supervision, direction or control then the payment intermediary (which could be the umbrella company or the worker’s personal service company (or ‘limited company’) cannot offset or reclaim any reliefs on travel and subsistence expenses incurred. 

Bear in mind we are only at consultation.  Regardless of what we end up with, one thing is very clear: the assessment of supervision, direction and control will be critical.  Failure of this test may see a worker’s income from an assignment fall, which in turn may put pressure on rates.  The limited company worker currently paying themselves outside IR35 may find they have to move to a deemed payment calculation as they would now be caught.

As the proposals stand, it is clear that detailed discussions will be required between recruiters and their clients to ensure the implications are fully understood and appreciated.   

3.    Increased funding for HMRC

You may already be aware the Government have an aggressive approach to identify and penalise individuals using tax avoidance schemes. The Chancellor emphasised this message in the latest Budget, with additional funding for HMRC of £750,000 to encourage investigations into this area.

Conclusion

It is clear that the combined effect of all of these changes will result in significant changes for the sector.

With a discussion document being published shortly re IR35 and RSG taking an active part in the consultation and round table, details will be provided as these progress.

The UK is well and truly in recovery; shouldn’t we be earning more by now?

Employees are yet to feel the effects of the economic recovery in their pay packets, according to the CIPD’s annual Reward Management Survey. Despite the fact that UK growth was the strongest it has been since 2007 in the last quarter, there is still no sign that this will be reflected in pay increases or extra bonus.

This is not common practice. Historically, more jobs and more vacancies mean that employers offer higher wages in order to attract and retain talent. So why the step away from tradition? What’s different? Recent research from the Office for National Statistics shows that when the economy was starting to get back on its feet in 2013, average earnings were rising at an annual rate of 1%. Now, in a state of dramatic growth in all other areas of the labour market, salaries are rising at just 1.7%.

Charles Cotton, Performance & Reward Adviser at the CIPD, believes this is in part down to the productivity puzzle as well as a steady supply of labour which has lifted the pressure from employers to increase starting salaries. Those benefiting most from this stronger economy, according to the CIPD’s report, are the manufacturing, production and private sector services. Unfortunately, for the traditionally less competitive, such as community and not-for-profit organisations, the slow wage growth is being felt intensely. This has led experts to believe that a return to the pre-recession average earnings growth of 4.5% is a long way off.

Many leading economists argue that a continued lack of wage growth could leave the economy vulnerable to setbacks, especially as growth has once again become overly dependent on consumer spending and low inflation.

Cotton noted that “a number of external factors means that it’s not as simple as increasing pay for most sectors... what’s important is that businesses ensure they’re regularly monitoring, evaluating and comparing pay.” On top of this, pay decisions need to be shared and communicated with the people they affect, “to put earnings into context, particularly where they might not be increasing”.

Which is exactly what the government is now proposing; from the first half of 2016, companies with more than 250 employees will have to produce gender pay audits. Hopefully, the transparency of these reports will help identify where exactly the gap is happening, in order to begin closing it. There’s a long way to go, but the long-term effects of this could well initiate pay equality, and therefore raise salary statistics across the board.

Of course, salaries are still rising, albeit at a slower rate. Cotton said that this “may be a reflection of structural changes towards the knowledge-based economy we’ve been seeing… If organisations continue to reward the ‘how’ as well as the ‘what’, it may well attract and retain more desired talent”. In the meantime however, as the CIPD points out, stagnant wages will be the concern of many who worked hard throughout the recession and want to see the fruits of their labour sooner, rather than later.

Sowing the Seeds for a New Employment Landscape

It’s no surprise that HR departments can be a bit obsessed about the future, whether it is on an individual level or as an industry. The challenges of dealing with the workforce at a micro level are just as challenging as dealing with them on a global scale, and we would all love a crystal ball to ensure the decisions we make today will pay dividends tomorrow.

But for the non-clairvoyant among us, we must rely on our expertise and knowledge to create a set of principles that we believe will both feed the current workforce and sow the seeds for the next generation of employees. This is now more important than ever as HR finds itself at a crossroads. The remarkable pace of change within technology and communications is providing either a road to opportunity and development of the HR role or potentially a recession into a basic business function.

These are issues that our latest white paper ‘HR in 2020; a new employment landscape’ seeks to address.

It is clear that there are many pitfalls ahead, with a significant shift in management practices needed to accommodate the rapidly changing workplace. It would also seem that not many of us believe we are anywhere near where we need to be in implementing these changes. In an international employee study by Oxford Economics, only 34% believe that management is prepared to lead a diverse workforce, and just 47% think they can effectively lead global teams, something that is increasingly necessary as technology makes the world ‘smaller’. This oversight could potentially be compounded into a ‘blind leading the blind’ scenario as we welcome a host of raw ‘Gen Y’ talent into the workforce through entry-level positions and graduate schemes.

Strong and informed leadership is, therefore, central to the shaping of business culture. For example, if we look at the expectations of Gen Y workers when it comes to technology, they are not just familiar with it, but expect to see it integrated into their own working environment, a decision that can only be made at the very top of the chain.

As technology undergoes constant innovation and choosing what to adopt becomes increasingly difficult, perhaps it is healthy to accept that ‘learning on the job’ might be a part of this process for everyone involved. Leaders must also be wary of a ‘sheep mentality’; the fear of missing out on popular innovations which prompts the adoption of systems or processes that do not actually fit needs.

As we are now all aware, one of the key influences technology exerts on business is through social media. The vast majority of organisations, stakeholders and customers use a variety of social media platforms, creating numerous opportunities (and risks) that require a leadership response. It is however, still obvious that organisations need to ensure their social media output contributes to business efforts, understanding target audience and tailoring content across platforms. Again, leaders need to be effective decision-makers on these issues. If certain social media platforms aren’t appropriate for their business, they shouldn’t be afraid to avoid them – even in the face of their more socially-aware employees.

The key to all of this is an ‘up-skilling’ of HR leadership; in particular, understanding technology and big data to help transform it into a highly analytical and anticipatory function. Becoming a more strategic arm of the business will give HR a ‘seat at the table’ and the ear of the board. Anticipatory HR departments are already 43% more likely to be involved in the long-term business planning process. These types of companies are also over six times more likely to have exhibited strong financial performance, versus those where HR’s planning process involvement is late or non-existent. In fact, a report by PWC claims that with sufficient collaboration and strategic focus, we could see HR leaders evolve into a Chief People Officer (CPO) role, a powerful and influential component of business leadership.

Of course, the flipside of this is that if HR remains transactional then it risks being replaced by the technology itself and becomes simply an outsourced function. Driven and delivered properly though, the next few years can be HR’s time to shine. So with its fate resting in its own hands there is no need for a crystal ball. Instead, let’s put to use strategic analysis, proactive staffing and employee engagement policies and evolve to be ready for 2020 and beyond.