Fewer workers but higher wages – Is this the future of the UK job market?

There is a lot of doom and gloom surrounding the UK job market at the moment, but there could be signs that not all the changes are necessarily for the worse.  

It is hard to get a full sense of how the job market will look going forward, particularly as the Autumn Budget is still more than two months away and many businesses are reticent to act before then.  

Still, there is enough data around at the moment that we can begin to understand how trends are changing and how businesses can keep control of rising employee costs. 

Is there something wrong with the job market in the UK? 

Whether you feel there is something wrong with the UK job market largely depends on who you ask. 

Figures from HM Revenue and Customs (HMRC) have been showing a steady decline in the number of workers on company payrolls with the figure dropping by 8,000 resulting in there being 127,000 fewer people on payroll than a year ago. 

This might seem like a death knell for the workforce, but it is important to contextualise these numbers alongside other factors.  

Wages continue to rise with the Office for National Statistics (ONS) finding that annual growth in regular earnings, excluding bonuses, was at 4.8 per cent in the three months to July. 

This is down from five per cent in the three months to June but growth is still meaningful in a time when people are concerned about the cost of living. 

In fact, for employers to be able to keep wages increasing is a sign of economic resilience in particularly trying times.  

Business owners may have been struggling to keep pace with the rise in employer National Insurance Contributions (NICs) as well as the increase of the National Minimum Wage (NMW) and the National Living Wage (NLW). 

However, these statistics show that by reducing the number of staff on payroll, employers are better able to reward the staff that can be retained. 

What can your business do if you are struggling with employee costs? 

Until the Autumn Budget arrives, there is an understandable hesitation to commit to any radical change in economic policy.  

Instead, it is imperative that businesses understand their current payroll obligations and ensure that they can continue to meet the needs of their employees. 

We are on hand to help you manage the costs of doing business and can find ways to optimise your financial position so that you can be better prepared for the Autumn Budget when it comes. 

In the meantime, consider the ways that a reduction in staff numbers could impact the team you have working with you. 

As seems to be happening, strengthening the wages of the staff you do retain is a good way to keep employee costs lower without disenfranchising a smaller team. 

Alongside this, you should ensure that you have strong HR support for your existing employees and consider the ways in which technology implementation might help them achieve their work goals more effectively. 

We want to support you and your team during this time of economic turbulence. 

For help managing your payroll obligations, speak to our team today!