UK companies are turning to contract workers

Recently UK companies are paying more attention and being more cautious with their employment plans because of the current state of the economy. Despite this, the present job market has been largely positive for UK companies and job seekers. The quantity of open positions is still historically high, which suggests that as we approach the second quarter, there will be a high need for temporary hiring.

In response to the current economic uncertainty, employers are adopting a cautious approach towards permanent hiring and opting for temporary workers to fill their vacant positions. This has led to the dwindling of permanent placements in the past four months.

According to recent reports, the increase in temporary billings has been the most rapid since September 2022, despite being moderate. This trend reflects the growing preferences of businesses for a flexible workforce that can adapt to the ever-changing market conditions.

According to recent data, the hiring of temporary workers in January 2023 resulted in a boom period of two and a half years. Many companies are now favouring contract workers over full-time employees. Although the increase rate was relatively low, it was the strongest since September of the previous year. The growing preference for temporary workers and the shortage of permanent staff were the main drivers behind the surge in temp billings.

The data revealed a significant increase in the need for workers in January, with the number of vacant positions rising at the fastest rate in three months. However, the rate of growth remained below the long-term average. While the demand for temporary job openings grew at a faster pace than that for permanent roles, both variables showed improvement as the number of temporary openings decreased and the demand for permanent staff increased.

Generally speaking, the demand for staff is still on the rise. According to the Office of National Statistics (ONS), there were 1,161,000 available job openings, down 75,000 from the three months before September. The report also revealed a decrease from the record high of 1,300,000 openings in the three months ending May 2022. Yet, it was still more than 40 per cent over the pre-pandemic level- 823,000 in the three months before February 2020.

The pattern of notable increases in starting salaries persisted in January. Although it had decreased from its peak in March 2022, the inflation rate was still lower than it had been over the previous 21 months. For temporary workers, the rate of pay inflation increased to a four-month high.

According to recruiters, the major causes of rising starting pay and salary are a reduced number of competent applicants and an increasing cost of living.

Decline in job seekers slower, but still significant

For the seventh consecutive month, the rate of the number of job seekers applying for permanent positions eased in January, revealing a decline in job seekers. Despite being substantial, the decline was the mildest since March 2021 and occurred far more slowly than the 2022 annual average. Recruiters attributed the decline in applicants to workers' increased caution regarding the growing cost of living, job security, and the uncertain economic future.

It's, however, important to note that London defines the general trend in that city, where there has been an increase in the number of applicants, making it a little bit simpler for employers to fill positions.

Meanwhile, the latest KPMG & REC UK report on jobs featured survey results from late February 2023. Its report confirms the market trend, characterised by a decline in permanent appointments and a reduction in the demand for workers.

The situation was substantially better in the first few months of 2022, and the situation is far from being in a recession. Permanent job openings increased at their fastest rate in four months in February, and there are still issues with candidate availability and skill shortages.

A recent ManpowerGroup Employment Survey conducted in January revealed UK employers saying they are determined to continue hiring in the first quarter of the year despite the country's economic slump and inflation crisis. The Net Employment Forecast for Q1 2023 is still positive at 19 per cent.

Based on responses from 2,030 UK companies, the survey asks whether they plan to hire more people, keep their present headcount, or reduce it in the first quarter -January to March 2023.

The Outlook shows a 5 per cent fall from Q4 2022, notwithstanding employers' intentions to sustain hiring steadily to preserve company activity and productivity.

"UK companies need to retain employees more in 2023"

Chris Gray, Director at ManpowerGroup UK, mentioned that most UK companies would need more talent retention this year. For the third quarter of 2023, Gray says they are "seeing a hiring cool", but there is still a shortage of skilled workers. As a result, employees continue to have a lot of choices in their working environment, which leads to job switching in search of better perks and skill development.

The Director noted that what the UK companies are providing and what employees need don't match up. According to him, UK companies are still eager to hire new talent, and job seekers want to take on higher-paying positions with more prospects for advancement. They do not, however, see these jobs advertised. Because job descriptions don't offer the skill development that job seekers want, they need to be read.

Gray advised that UK companies need to be transparent about the prospects for advancement and the training they are offering.

He continued: "Approximately ten million people in the UK currently do not have a job, with 1.2 million unemployed and 8.9 million classed as economically inactive. It's time to bring these workers into the fold."

The skill gap remains a challenge in the UK financial industry

According to Finance recruitment outlook, 2023 will continue with the candidates in the driver's seat. Karen Young, Director of Hays and in charge of the company's Accountancy and Finance Division, explained that we may see the beginning of yet another period of difficulty for companies, even though recruiting plans don't appear to be slowing down.

According to Young: "Over 60 per cent of those hiring accountancy and finance professionals plan to recruit staff in the next 12 months." However, she further noted that this was only a slight increase from the previous year.

The skills gap that has characterised finance recruitment for some time will be around, with 90 per cent of UK companies reporting it. This impacts corporate growth and productivity, negatively impacts product quality and customer service, delays projects, and prevents much-needed reforms.

All of this will increase the difficulty of finding the proper talent. Moreover, as seen in AB's graphics, based on Robert Half research, 26 per cent of CFOs aim to have new positions, and 89 per cent see talent attraction as a "concern," putting the candidate in a strong negotiating position.