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Expert Insights

07 March 2022

The talent gap, recruitment and retention issues

In addition to the ongoing challenges COVID-19 brings, employers continue to be plagued by issues in attracting and retaining talent in a market rife with labour shortages and widely-reported pay pressures.  In this article we highlight some key issues and considerations for employers, as well as some predictions for the year to come.

Labour shortage

In January, the Confederation of British Industry cautioned UK-based businesses to expect labour shortages to continue over the next two years, as the effects of the COVID-19 pandemic have left many businesses struggling to recruit and plug gaps within their workforce.  This issue is sector-agnostic and prevalent across all job roles, at all levels and locations but has heavily impacted the manufacturing industry, amongst other key sectors.  In its Annual Manufacturing Report 2020, PwC stated that “British manufacturers are facing the largest shortage of skilled workers since 1989, with many citing recruitment as its biggest challenge”.  Undoubtedly, this shortage of talent will be affecting SMEs the hardest as they will be hard pushed to compete with the competitive remuneration packages offered by bigger companies.

Harder to hire international workers

ONS data confirms that, in 2017, EU workers made up 11% of the manufacturing sector.  The combination of national lockdowns, travel restrictions, Brexit and changes to immigration law has dramatically impacted access to an international workforce that has historically been more willing to take on certain roles than the local workforce.

HR Consultant Jim Richardson of Megella Limited anticipates that there will be “increasing numbers of early career hires as businesses resort to growing internal pipelines to manage the talent shortage for the next five years”. Sadly, manufacturing is not seen as a desirable career path for many in the UK and younger members of the working population view the sector as having low wages, poor benefits and working conditions.  Employers in the sector would do well to advertise the fact that the average salary in the manufacturing sector in 2022 is £35,277 – 12% higher than the UK average, according to the 2022 MakeUK/PwC senior executive survey.  Incentives for embarking on a manufacturing or other career should also be better advertised (see below regarding training opportunities).

Retention of current employees and attracting new talent

In the period October to December 2021, job-to-job moves reached record numbers, driven by resignations and indicating that now, more than ever, retaining talent is key.

Remuneration pressure

In April, the National Living Wage will increase from £8.91 to £9.50 for workers aged 23 and over.  Employers are under mounting pressure with recruitment and salary costs increasing, high overtime bills resulting from labour shortages, high inflation, and increased import and export costs following Brexit.  High inflation means wage increases need to be significant to be well-received by staff, who might otherwise look to join a competitor with a better offering.

Benefits and additional training

In order to retain staff, it is not just a question of employers throwing money they may or may not have at the problem. The non-remuneration focus is now increasingly important. Employees are keen to ensure that they have access to progressive learning and development opportunities and place high value in their employer’s support on employee health and well-being matters, as well as their environmental and sustainability credentials.

An option open to employers is to invest in recruitment drives, attractive benefits packages and training opportunities; however, this is unlikely to be an easy option for SMEs to adopt as they are less likely to have large sums of surplus cash to invest at this difficult time.

Competitive benefits can make an advertised vacancy more attractive.  Now is as good a time as any for employers to review their benefits package and those of their competitors to identify any room for improvement.  For example, pension plans and insured benefits, such as medical and dental insurance, are frequently offered but it may be worth exploring more flexible benefit options that allow employees to choose the benefits that they access. As the younger generations enter the workforce, benefits offerings will need to change to cater for their needs.

Internal mobility

Jim explains that internal mobility should not be overlooked and that employers can often neglect their internal talent.  According to Jim, “Recruitment Process Outsourcing (“RPOs”) can add significant value for employers as they can use technology to help match skillsets of the internal workforce and help promote internal mobility – we could even see a move into internal headhunting”.  Offering comprehensive training programmes which assist employees to develop their existing skills and learn new ones is, of course, mutually beneficial.  Ongoing training can be a useful way to retain long-term employees and ward off attrition, as well as attracting new talent.  Hiring from within with bespoke development plans to upskill internal candidates will help limit attrition and fill vacancies with candidates who have a proven cultural fit. Younger generations are looking for real investment in their career progression and will not apply to organisations if they cannot see the opportunity for future development.  It is worth looking into the training opportunities offered via the government’s “Plan for Jobs” programme, including the National Skills Fund, which is a scheme that gives adult workers access to training in a wide range of sectors, including manufacturing technologies.  In addition, establishing an internal mentoring programme, pairing more experienced workers with entry-level ones, is a great and cost neutral way to bridge the knowledge gap.

The good news is that, over the last two years, businesses have been able to implement change at a much more rapid pace than we have seen historically, which means that 2022 offers lots of exciting possibilities for innovation in recruitment and employee relations.

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