Salary Analysis April 2022

11th April 2022

Background

Howarth Morris have specialised in finance and HR recruitment across the UK since 2007. In pretty much every year since we commenced supporting business and candidates, we have produced salary surveys due to the demand from both our client and candidate network – the last exception being 2021 (Covid lockdowns and furlough meant the numbers relatively meaningless) and 2008/09 due to the financial crisis.

Already we have had a couple of client requests for our 2022 salary survey in response to media reports (and conversations with recruiters!) as they feel a little distant from the market after 2 years of Covid restrictions. Based on this we started speaking to many more clients and candidates specifically about what they were seeing in the marketplace.

Introduction

Based on the feedback we are receiving from clients and candidates, as well as our long-term market expertise, we decided that we wouldn’t produce a 2022 salary survey – while we will always be happy to give real time report and analysis to our clients and candidates on rewards and benefits but on a more tailored basis to consider sector, location, and level.

So why did we take that decision this year? Because conversation after conversation led to the realisation that the current market conditions mean that such surveys are out of date as soon as they are produced.

What We Are Seeing in the Market

This is not helpful in the long term to anyone and while we like to see the candidate market be fairly rewarded and see long term salary appreciation, the current market conditions, and rapidly growing living costs as well as historic supply & demand imbalances are leading to a salary market that is changing by the day and for every example of an ‘average’ salary. we immediately see numerous real-life examples that throw that ‘average’ into the bin.

And the direction of salaries is not a downward trend as you will be aware.

While we want candidates to be well paid, we also want them to be paid fairly at a level that maintains a realistic balance across the economy where salary levels, along with other costs, mean people are treated well and fairly rewarded while businesses can make a fair profit while consumers pay a fair price for goods and services.

This balance is currently at risk, and we advise our clients to focus on talent retention; investment in technology; clear values and staff engagement; and if recruiting, act fairly, honestly, and decisively.

When we were asked to produce surveys in 2021, we again took the report approach and we stressed the importance of macro-economic factors that meant that, due to the unusual nature of Covid, lockdown and some of the fiscal remedies, we did not anticipate an increase in candidate availability or a reduction in salary expectations.

What Have We Seen in the Last 12 Months?

Since March 2021 we have certainly seen a big increase in demand for talent as the economy has bounced back strongly (certainly in 2021 – a growth rate of 7%+).

Then, from June 2021, there were the publication of a range of surveys (as well as standard ONS data) that earlier in the pandemic had not really been studied by business in general or the recruitment sector. Namely the increase in the demand for talent alongside a reduction / shortage in that critical resource.

Effectively we are experiencing a period where we see the highest number of job vacancies in the 40+ years since the statistics started being recorded and a 24 year low in the number of active job seekers – which leads to an obvious imbalance.

This is highlighted by private surveys (REC) suggesting 1 million unfilled vacancies across the economy in January 2022 which is predicted to rise to 1.2 million by April 2022.

When this is allied to the real increases in living costs – and it is best to look at real increases here (such as fuel, energy & food) rather than just looking at the CPI or RPI – talent across the whole economy is seeing income squeezed. And this is before the additional employment costs still planned for April in terms of increases in National Insurance for both employers & employees.

This impact is being felt cross-sector and at all levels and across all geographies of the UK economy.

So, unusually we are seeing both a surge in demand and an equally extreme squeeze on supply. And it is considered by many commentators far more qualified than Howarth Morris that the structural factors at play (mainly around factors such as an ageing population, reduced European talent movement due to Covid & exiting the EU, and the time to renavigate training and development of talent) mean that we are in a new period of demographic and structural employment population challenges that are not going to change in the short term.

And, therefore the long standing, accepted economic reality is that if there is an imbalance where demand for labour is greater than supply this can only be rectified either by: elasticity of price (i.e., employment cost) on a micro level; technology or recession on a macro level.

In 2021 whilst it was widely anticipated there would be quarter point interest rate rises, we predicted that we would see low interest rates in the UK until at least 2023/4 to assist the post covid economic recovery, this assertion is being challenged by inflation in the real economy and global, geo-political uncertainty.

The pandemic and associated lockdowns have already changed peoples’ expectations, attitudes, and employment requirements. Key factors that we highlighted in March 2021 in terms of expectations professionals of all levels now seek remain: –

The flexibility of a hybrid work pattern and location
Expectation on being measured on quality of output, and not on inputs (i.e., strict hours worked, log on time / log off time)
Greater value put on holiday entitlement
Greater value put on employer pension contribution
Greater emphasis put by candidates on a business not just having clear values but also executing them
Job security in term of risk of moving employer
Employer stability (& reputation)

Other Factors

A couple of other key factors that can impact candidate interest and salary expectation are: –

The type of candidate you want – someone to keep the role / function / business operation OR someone to drive it forward
Your requirements in terms of previous experience in relation to candidate experience within a regulated environment and/or experience in alternative finance sector
The higher the level of role, the fewer candidates available – so creating the interest is key
In many of the roles (below Director level), there is a range of levels of experience and qualification that could be suited as these roles can be found at different levels e.g., an Analyst could be qualified, or part qualified, and the experience and salary level would differ appropriately
With several variables, these suggestions are very much a guide of the range that should be expected

The Result is…

We are seeing a landscape where in some situations candidates are interviewing at 3 or 4 companies within a short timescale, we are regularly seeing clients where they are seeing very few CVs for vacancies and even fewer actual interviews.

Clients are also seeing their offers ‘gazumped’ on a regular basis – sometimes by other opportunities, sometimes by the candidate’s existing employer.

Where clients insist on a multi-stage, fixed process that could take 2 or 3 weeks, they are losing candidates from the process on a regular basis as other businesses react more quickly.

And then there is the risk of losing current staff as, sometimes huge, salary uplifts are floated in front of them to move to pastures new – we have seen several examples of candidates being offered new roles with salary increases of 60+% – and no, that is not an exaggeration. £35,000 to £50,000 in one move; £31,000 to £55,000 + car in one move being just 2.

Conclusion

Some of the structural, demographic factors currently at play will take time to rebalance and this will be reliant on new talent entering the employment population and is therefore reliant on further education and training. So, ensure you are bracing your team, division, business (and yourself!) for a really challenging period in terms of recruitment.

This means your recruitment cycle will be longer, the available potential candidates will be fewer, and the overall costs to recruit will be much higher.

So what options are there you may be asking?

I am just a recruiter – these blogs are just my opinion based on 20+ years’ experience – so I don’t profess to be an expert. But, for me, the key focuses are: –

Work on engagement to retain your people – this means communication and above all listening
Look at how you can develop your team in ways that increases their experience and increases their interest, value, and loyalty
Look at areas where you can invest in technical/digital improvements in your processes which reduce your headcount need and takes pressure of your existing team
If you recruit trainees / graduates – don’t stop!
If you need to recruit, understand exactly what you need, not what you think you need. It may not be a carbon-copy of the person or role that is becoming vacant
Have a planned, smooth, and efficient recruitment process and use technology such as HMVantage video interviewing to accelerate the process without losing detail
If the role can be hybrid – do it – people will travel further if they only need to attend site 2 or 3 times per week, thus increasing your catchment area
And ensure you engage positively with all potential candidates to ensure your business is complimented
And if you really like a candidate, don’t wait for a ‘benchmark candidate’ – there may not be one and you can lose the one you like
Treat them as you would want to be treated

This list isn’t exhaustive – just food for thought.

We hope you have found this blog informative and insightful For further information, tips and advice, please contact us at info@howarthmorris.co.uk