As the UK’s skills crisis intensifies, some employers are battling pay inflation demands of over 37%, adding to the financial strain that businesses are already facing, according to new research by firm Robert Half.

The research, which analysed and reported on market salaries, hiring trends, and skills requirements across the UK, revealed that 32% of employers are finding themselves in the middle of a wage spiral, having to inflate salaries to maintain a competitive edge in the war for talent. A further 26% of companies are offering additional one-off bonuses to keep hold of their staff.

While over a quarter (27%) of firms are planning pay increases in line with inflation, those looking to recruit in skills short markets are facing potentially budget-breaking salary increase demands.

According to the research, insufficient salary is the most common reason for rejecting a job offer. Robert Half’s data showed that 63% of workers are ready to decline a new opportunity because the salary doesn’t suit.

Matt Weston, Senior Managing Director UK & Ireland, at Robert Half, said, “Many employers may be shocked next year at the salaries that some of their most in demand roles will command. Without careful planning this will weigh heavily on company profitability at a time when businesses are struggling with costs.”

“It is no surprise to see financial incentives are perceived to be a top solution,” Weston continued. “However, continuous pay rises aren’t sustainable and firms need to consider how else they can boost hiring prospects and reduce attrition. With the UK continuing to face significant skills shortages and 75% of employers concerned about the attraction and retention of staff in 2024 according to our research, firms will find themselves with little option but to listen to the employee voice.”

Weston added that pay is not the ‘be-all and end-all’.

According to Robert Half, a robust corporate culture and a tailored retention programme can be a cost friendly strategy.

“Our research shows, for example, that almost half (47%) of the workforce would reject a new job if the company didn’t offer flexible working, yet news reports continue to highlight brands that are enforcing office returns,” Weston added. “And in many instances employees leaving a business do so due to deep-rooted talent attrition causes such as heavy workloads and a lack of development opportunities. Business leaders must address all aspects of the employee experience and must do so fast, since an increase in pay is the inevitable by-product of ‘jumping ship’.”