Contrary to the OBR forecasts, CIPD predicts an uncertain outlook for pay and employment in the next few years

According to the CIPD/KPMG “Labour Market Outlook” Survey - Summer 2010 - employment will remain stable in the next months. Differently from what expected and forecasted by the Office for Budget Responsibility (OBR), the CIPD believes that in the next two years an increase of the unemployment rate is very likely to occur, in that the private sector recovery will be counterbalanced by the 600,000 job losses expected by the Government, over the next five years, in the public sector.

CIPD vision also sensibly differs from the OBR one as for what concerns the pay outlook.

Whilst the OBR is expected, in fact, that salaries and wages will grow by 2.8% in 2011 and by 3.5% in 2012, the evidence gathered by the CIPD, through its members, suggests that it will be some time yet before pay level rise above 2%, even more so because of the pay freeze announced by many employers of the public sector for the next two years.

Overall, the CIPD expects a rather bleak outlook for the next few years both for employment and pay.

Recruitment

According to the CIPD-KPMG research findings, although at a slower pace than in the previous quarter, private sector employment will continue to increase in the third quarter of this year. The net employment intentions balance (1) for this sector, in fact, has dropped from +29 to +19 over the last three months, remaining well above the level it had reached in winter 2009/2010 (+5).

On the one hand, the private sector and, more specifically, the manufacturing sector, employment growth is expected to increase (+48), on the other hand of it, employment possibilities within the public sector remain very weak. The final balance of the net employment intentions, in fact, although showing a sign of recovery in comparison to spring 2010 (-43), still remains considerably negative, at – 35. This is clearly due to the expected contraction of the public sector employment offer, namely administration and defence (-64) and local government

(-74).

In terms of employment expectations, the private sector is definitely showing better perspectives than the public sector.

The scenery can be summarised as follows:
IT sector +42
Manufacturing and production +40
Consultancy services +38
Services +15

Public administration and defence -64
Education -51
Healthcare -42
The research also revealed some interesting differences at regional level, the best score, in terms of net balance, is expected in London (+15) and in the Midlands (+13), whilst the worst results are expected in Scotland (-35) and England (-10).

These findings are in line with what envisaged by the CIPD, that is a two-speed job markets are bit by bit emerging from the current political and economic situation.

A further interesting trend emerges comparing the net employment balance of SME (Small Medium Enterprises, employing 1 to 249 employees) and larger employers (employing 500+ staff).

The index continues to be rather high for the SME at +29, whilst for the larger organisations the index remains negative at -16.

This is possibly due to a couple of reasons: public organisations tend to be larger than private sector ones and a relevant number of private organisations are planning to offshore jobs.

As for the recruitment intentions, according to the data gathered, it seems that the proportion of companies planning to recruit during the 4th quarter of this year has stabilised, with 67% of organisations planning to boarding new staff during the next three months.

The stability of this trend also emerges analysing data in the light of the different sectors concerned. Considering the different sectors, the percentage of companies planning to recruit new staff in the next quarter are as follows:

71% private sector

63% voluntary sector

60% public sector

12% “green” sector

According to the employment intentions emerged from the overall research, 80% of the new recruits will be offered a full-time job, whilst 31% of the total job expected to be created will be offered in the form of term contracts. Whilst the first figure is in line with the current employment state of play, the term contracts percentage is higher than the current one.

 

Redundancies

Whilst recruitment intentions remain essentially stable, redundancies intentions are on the rise for the second quarter in a row. In fact, one over three employers, 32% to be precise, are planning to make redundancies during the next quarter, compared to the previous 29% ratio.

More than one third of public sector employers are planning to cut jobs in the next quarter, in line with the findings emerged from the previous quarterly survey. Is, instead, increasing the number of private organisations planning to make redundancies, the last intentions show a ratio of 30%, compared to 24% emerged during the spring survey. Much better seems to be the picture in the voluntary sector, where job cut intentions have fallen from 34% to 24%.

Sectors more likely to cut jobs are local governments (63%)and education (45%), whilst the less likely to make redundancies in the next three months should be the manufacturing and production sectors (23%).

Geographically, the highest redundancy percentages will concern the south-east of England (42%), Scotland (38%), England (35%) and London (28%).

Organisations have indicated, on average, their intention to make redundant 5.5% of their staff, compared to 3.6% emerged during the previous investigation.

Analysing data according to the different sectors it is possible to see how varied the redundancies intentions are from sector to sector. In the public sector 7.8% of organisations are planning to make redundancies in the next quarter, whilst in the private sector the percentage of organisations planning to cut jobs is 4.7%. In the voluntary sector the ratio will drop to 2.6%.

Although the cost of making redundancies vary from organisation to organisation, it clearly emerges that, possibly because of the longer tenure typically associated with the public sector, redundancies costs are higher in this sector, 23% of public sector employers, in fact, reported that their cost for redundant is more than £17,000, with just 10% of employers reporting a cost per redundant of less than £5,000.

Pay

If the employment outlook does not really look bright, expectations do not seem to be better as for what matters pay perspectives.

In the next 12 months, in fact, bonus excluded, the average basic pay settlement is expected to be steady at 1.5%. This average figure is practically stable since 12 months now. In fact, during the last four quarterly surveys it has been varying between 1.5% and 1.6%, consistently with official figures provided by the Office for National Statistics, according to the findings emerged by their Labour Force Survey.

Nearly all the employers taking part to the investigation (84%) are planning a pay review for the next year; in particular 33% are planning a pay increase, whilst 20% are planning a pay freeze.

Nonetheless, 30% of employers stated that the kind of review will depend on the organisational performance.

The future pay picture appears to be more favourable for private sectors staff, where the mean pay increase is expected to be at 1.9%, compared to the 0.7% of the public sector. An even better scenery is expected for the voluntary sector, where the mean award should increase of 3.1%.

Sectors which should benefit the most by the salary basic review will be the consultancy services (3.9%), finance, insurance and real estate (3.3%).

In the public sector 40% of surveyed organisations unveiled their intention to freeze salaries, whilst just 11% of private sector employers are planning to follow suit.

(1) Net employment intentions balance measures the difference between the proportion of employers that expect recruitment and redundancies to increase staff levels and those who expect to decrease staff levels in the third quarter of 2010.

IS THE GRADUATE JOB MARKET OUTLOOK REALLY SO BLEAK?

Chris Blackhurst, city editor with the London Evening Standard, argued in the 1st July issue of the newspaper, that the current state of play of the graduate job market is so harsh to the extent that “It’s no use society encouraging more pupils to go to university (and making them borrow heavily) if there aren’t the jobs for them when they qualify”.
Many students, in fact, in order to achieve their graduation, need to apply for loans and other kind of debts, so that, when they graduate, they leave with the burden to pay back the money they have got. Their need for a job become, then, particularly vital.
The job market, on the other hand, is everything but buoyant, so that there are really not many opportunities available to the fresh graduate people. The career ladder is not really amongst their first thoughts, let alone are young graduates able to plan on subscribing a mortgage to buy a flat.
According to a study, carried out by High Flyers Research, 270 graduates apply for each job in the consumer goods industry, more than 100 students apply for every vacancy, 75 for each available job in the financial services, and an average of 45 students are competing for each graduate position.
Organisations are overwhelmed, to the extent that many private organisations have decided to freeze their recruitment activities.
In the private sector the picture is not really better. Usually, each year, UK graduates fill 39,000 jobs in the public sector, but this year (and very likely not only for this year) the 25% real cut budget imposed by the chancellor George Osborne will definitely have a remarkable impact.
According to Charlie Ball, Deputy Research Director of the Higher Education Careers Service Unit (HECSU), arguably “the next four years could be the toughest for new graduates ever”.
As pointed out by Chris Blackhurst, all of that also impacts graduates parents, who will need to continue to support their daughters and sons and put them up.
The only opportunities currently available in the job market relate to the retail sector, barely a sector able to give graduates the deserved reward for their studies, if anything to all of them.
If in the past middle-class parents aim was securing their kids a place at university, now their priority and focus is on them to find a good job, offering them training and career opportunities.
Many graduates are, in fact, working unpaid internships, unpaid jobs with charities, or working in coffee bars and the like.
The conclusion reached by Blackhurst, then, is rather pragmatic and understandable.

London expected to face candidates shortage
The finding of another research, carried out by Ambition, on the other hand of it, reveals that London will face a shortage of skilled candidates, in the second half of the current year.
In particular, the ratio vacancies/candidate will rise from the 3/10 of the first quarter of 2009, to 10,3/10 during the third quarter and even to 12/10 during the fourth quarter of 2010.
Best candidates have been snapped up, leaving the talent pool nearly empty and demand exceeding offer.
This is in evident contrast with the 75/1 ratio concerning the financial services and banking graduate jobs described above.
Still according to the Ambition research, London shouldn’t suffer any job number reduction and even though a slowdown in growth should occur, new job seekers shouldn’t have particular difficulties to find a job.
Professional services experienced candidates are now holding their current jobs waiting for their announced salary review. Experienced product controllers are expected to get a 23% increase of their daily earning, whilst skilled financial services specialists are expected to get generous offers to be retained.
Financial services, legal and professional services should be the first markets to experience the candidates shortage predicted by Ambition.
The government, from its side, expects that the private sector will be offering growing employment opportunities for the next five years, in London this trend should already be underway.
Jobseekers in action
According to another research, carried out by MyWorkSearch, more than 50% of jobseekers have been unemployed for more than 6 months, whilst 30% of them have been unemployed for more than 12 months.
Additionally, more than 33% of jobseekers have made at least 100 applications, and of them 32% have received just an interview offer or even none.
The problem is not just affecting youngsters, in that more than 50% of jobseekers are over 45 and 47% are also educated at graduate or post-graduate level, which means that, as supported by Chris Blackhurst, qualifications are not helping jobseekers in their search.
79% of jobseekers, because of the difficult job market situation, have changed, or are considering to change, their industry sector and a staggering 84% is willing to apply for junior positions. Many have also accepted part-time or temporary positions in order to get a job.
Jobseekers are more likely to apply for a job on Mondays, nonetheless over 40% of them spend their Saturdays sending out applications and of them over 30% extend their efforts till Sunday.
The preferred time to send applications out is between 10.00am and 11.00am, 25% search in the evening and 15% start in the early morning before 8.00am.

MBA graduate prospect
The Graduate Management Admission Council (GMAC) claims that, although the business schools graduates job market is still difficult, there are evident signs of improvement.
The GMAC carried out a survey amongst employers, at European level - Corporate Recruiters Survey -, according which organisations, in contrast with what happened in the previous year, are now planning to hire new MBA graduates. Whilst in 2009 only 36% of respondents admitted to have plan to hire MBA graduate, the figure has rose to 44% this year.
The industries which will recruit the highest number of MBA graduates are consulting and healthcare. Worldwide it is expected that marketing and sales positions will offer plenty of opportunities, followed by finance and investment banking.
Unless you don’t need to sell your house to do so (and maybe even needing to do so), getting an MBA degree is definitely still worth it, according to the GMAC survey, in fact, the starting salary that organisations are going to pay to new MBA recruits this year has been identified at €65,419, about 80% higher than the €36,405 average salary organisations are likely to offer to new recruits holding “just” a Bachelor’s degree.

Current trends
It also seems that employers are switching their emphasis from cost containment to business growth. Those who are still focusing on cost-cutting fell from 66% of last year to 57% this year.
The survey shows that improving performance still is business’ first priority.
The number of MBA students who received an employment offer before completing their studies dropped from 50% of 2009 to 40% this year. Notwithstanding, people graduating in 2010 were more optimistic about the future of the economy than people graduated in 2009.

LONGING FOR A LONGER BREAK OR REALLY ILL?

According to the findings of a research carried out by Mercer, in the UK, employees are more likely to be sick on Monday.

The research, conducted over a sample of 11,000 private sectors employees, revealed that 35% of all sick absence at work is concentrated on a Monday. Attendance is then likely to increase as the week goes on.

Curiously enough, perhaps, on Fridays the percentage of sickness related absence accounts jut for 3%.

Reading among the lines of these findings, it clearly appears that the real reason for this so high level of absence on Mondays should not be related to long weekend plans, in this case, in fact, also the Fridays ratio should have been rather high, on the contrary, as we have seen, it is even the lowest. Somewhat like: it’s really hard to come back work after a weekend at home (or elsewhere), but once I’ve found the courage and the bravery to come back, then I can also resist till Friday, and I’m more likely to do so, if I’ll be able to go work on Tuesday and Wednesday.

The real reasons for this trend are, then, very likely linked to the lack of motivation and engagement. Line managers have a fundamental impact on this, in fact, if it’s true, as it is true, that people leave their managers, not their organisations, it is also very likely that employees are unwilling to come back to work, on any given Monday, because of their Managers too and that should provide food for our thoughts.

Back to the findings of the research, January revealed to be the month of the year with the highest level of absence, with January 3 and 4 the best (or rather the worst) day of the year, in these days, in fact, nearly 5% of the whole private employee population was sick in 2008.

Health and safety measures, nonetheless, need to be not neglected. Nearly a quarter of ill related absence (24%) were, in fact, linked to musculo-skeletal causes, so that maybe appropriate actions could be taken by employers to reduce this percentage.

Other common and, to some extent, classic causes were cold, flu and viral infections in general, which accounted for 17% of the total absence number.

These findings are, by and large, related to short periods of absence. Longer period of absence are, instead, mostly linked to stress conditions, with an incidence rate of, if anything, a lower rate (4%).

Female workers have taken 24% more days than their male colleagues. Absence for stress related reasons, e.g. depression, were higher among women (more than twice) than in male workers.

On the other hand of it, males are the “champions” in muscle sprains, fractures and other physical problems, yes many of us don’t consider ageing consequences when playing football on weekends.

All of these findings are actually very interesting and, taking advantage of the developments in processing and data management, each organisation could try to monitor data and, hopefully, inform employees about health and safety risks, especially men, who believes they are invulnerable and don’t need care.