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UK — Private sector experience of recession could help public sector

24 May 2010

The latest Employment Trends Survey 2010 published by employer organisation Confederation of British Industry (CBI) and recruitment experts Harvey Nash, reveals that nine out of ten employers (91%) communicated the impact of the recession on their business to staff. As a result, 87% of businesses believe staff understood the need to change working patterns, and more than half (56%) said staff showed a flexible attitude to change.

As the economy recovers, the survey also shows that employers have been able to phase out some of the more drastic measures introduced during the recession and are hiring again. A year ago nearly two-thirds of companies had a recruitment freeze in place. This fell to 37% six months ago and now stands at just 5%.

But economic conditions remain challenging. Consequently, most businesses are still adopting a cautious approach to pay. 16% are still operating a pay freeze, while just 3% are planning to make an above-inflation pay award.

John Cridland, CBI Deputy Director-General, said "employers have come out the other side of the recession, having managed to keep many more people in jobs than had been expected. This has been largely down to the flexibility and goodwill of staff who quickly adapted to emergency measures, including pay and recruitment freezes. Good communication played a key role in helping employees understand the changes needed to safeguard jobs."

"So far the public sector has been cushioned from the impact of the recession, but it now faces a squeeze. Drawing on the experience of the private sector in engaging employees during the recession to deliver much-needed change could help the public sector minimize the pain of spending cuts."

Reflecting on how they got through the recession, a large majority of employers (83%) believe the UK's flexible labour market helped stem job losses. Nine out of ten companies made changes to working patterns in response to the recession. The most widespread measures were pay and recruitment freezes, which were introduced by 58% and 54% of firms respectively. More than a third (35%) embraced flexible working, including tele-working.

Other changes to working patterns included: cutting back on paid overtime (32%); reducing the use of agency workers (28%); cutting shifts (13%) and short-time working (12%).

When asked to list their top three workforce priorities for the coming months, more than two-thirds of employers (67%) said achieving high levels of employee engagement is top of their list, followed by containing labour costs (48%). Recruiting to key vacancies (42%) and retaining staff emerged (42%) as the joint third most popular priorities.

Employers believe strong employee engagement was important during the recession and 7 out of 10 firms believe it will play an important role in the recovery. The most popular method of communicating the impact of the recession to employees was through face-to-face meetings (89%), backed up by email updates (54%), intranet postings (48%) and letters (26%).

In anticipation of a slow and fragile recovery controlling labour costs will continue to be an important priority for employers. This is reflected in the latest pay round with very few firms planning to make an above-inflation award. 29% of employers said they were planning a rise in line with RPI inflation, one in five (20%) a general increase below RPI, and a quarter (25%) said they intended to target rises on selected staff. The number of companies reporting they were planning to freeze pay at their next pay review dropped from 47% six months ago to 16%.

Employers face a difficult balancing act in their desire to retain existing staff and attract new recruits, while at the same time keeping a lid on costs. Recruitment prospects for the year ahead are mixed but improving. Just 5% of companies expect recruitment to be higher across their business as a whole. Instead recruitment is likely to be patchy and targeted on filling key posts. 23% expect recruitment to be higher in some parts of the business, while 27% expect it to be higher in some and lower in others.
Albert Ellis, CEO of Harvey Nash, said "the UK has one of Europe's most flexible labour markets and without doubt this will play a major part in the recovery. For the public sector the outlook is much less certain and we await the details of the government's spending reduction plan."

"Whatever the outcome this year, our experience stretching back over twenty years shows that demand for talent will continue. This is reflected in the fact that the majority of employers express concerns about finding the appropriate skills to capitalise on the recovery."
To read the full survey please click here



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