OUTLOOK LABOUR MARKET - Spring 2021 - CIPD
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in partnership with LABOUR MARKET OUTLOOK VIEWS FROM Spring 2021 EMPLOYERS
The CIPD is the professional body for HR and people development. The registered charity champions better work and working lives and has been setting the benchmark for excellence in people and organisation development for more than 100 years. It has more than 150,000 members across the world, provides thought leadership through independent research on the world of work, and offers professional training and accreditation for those working in HR and learning and development.
Labour Market Outlook Spring 2021
Report
1
Labour Market Outlook
2 Spring 2021
3
4
5 Contents
1 Foreword from the CIPD 2
6
2 Foreword from Adecco 4
3 Key points 5
4 Recruitment and redundancy outlook 6
5 Pay outlook 10
6 Survey method 11
1Labour Market Outlook Spring 2021
1 Foreword from the CIPD
1
The quarterly CIPD/Adecco Labour Market Outlook aims to offer an early indication of
2 future changes to the labour market around recruitment, redundancy and pay intentions.
The survey is based on a survey of more than 1,000 employers.
3 The latest quarterly CIPD/The Adecco Group Labour Market Outlook survey finds much
optimism among employers about short-term employment prospects. The survey
indicates that the overall anticipated demand for labour strengthened considerably
4 between the winter and spring quarters. This was due to both a fall in expected
redundancies and an increase in recruitment activity.
5
The report’s net employment intentions balance, which looks at employment intentions
for the second quarter of 2021, has risen sharply to +27 from +11 in the winter quarter.
6 Indeed, employment intentions are stronger than at any time since the winter 2012/13
report when this measure was introduced. Employer optimism is evident across all
three major sectors of the UK economy, including the private sector (+28), voluntary
sector (+28) and the public sector (+22). This contrasts with the global financial crisis
recovery, which saw sharp falls in public sector employment levels partly offset by strong
employment growth in the private sector. Indeed, employer optimism about staffing
levels is positive in all sub-sectors (Figure 3) of the economy, which points to a strong
and broad-based employment recovery in the short term. The news will provide some
reassurance to policy-makers ahead of the closure of the furlough scheme in September.
The survey data thus suggests that the unemployment rate may be close to peak,
especially given the reported fall in the supply of overseas workers. The latest official
labour market statistics highlight a dramatic fall, in particular, in the number of EU-born
citizens in employment. The figures, which are based on new data using payroll
employees and Migrant Worker Scan data, reveal that the stock of EU-born workers in
the UK fell by 7.4% between October–December 2019 and October–December 2020.1
The CIPD’s view is predicated on the economy not suffering any additional unexpected
shocks, such as a delay in restrictions being lifted.
At the same time, despite the evident optimism in this quarter’s survey, it remains
likely that such strong employment growth will soften during the course of 2021 as the
aftermath of the pandemic continues to be felt throughout the economy and as the surge
in demand of labour caused by the easing of restrictions in certain sectors levels off.
Nonetheless, a new challenge for some employers may emerge in the shape of skill or
labour shortages, which is also due to the recent fall in supply of overseas workers and
the recent introduction of migration restrictions. This is likely to start to feed through into
recruitment difficulties for many organisations seeking both skilled and unskilled labour.
Employers in sectors that have disproportionately relied on EU migrant workers over the
last decade, in particular, are likely to need to think more creatively about their workforce
planning and talent pipelines to ensure that they can continue to access and develop key
skills. Specifically, there needs to be a mix of attracting new and diverse talent, upskilling
1
ONS. Labour market overview, UK Statistical bulletins, Office for National Statistics.
2 Foreword from the CIPDLabour Market Outlook Spring 2021
existing staff and a renewed focus on job quality. Some commentators have suggested
the move to hybrid and remote working can help broaden access to talent based
1 overseas. However, this option will be closed for the vast majority of employers given the
disproportionate number of EU workers that are employed in labour-intensive sectors such
2 as food processing, hospitality and social care. In addition, employers that use remote
workers based overseas will require significant tax and legal expertise.
3 The story on wages is also positive, pointing to a relative jump in basic pay for staff,
especially private sector workers. Employment confidence is therefore reflected in pay
award expectations, although it should be borne in mind that they are modest by historic
4 standards.
5 Overall basic pay award expectations have risen to 2% from 1% compared with the
previous report. Median basic pay expectations in the private sector have increased to
2% from 1.5% since the previous report. By comparison, median basic pay expectations in
6 the public sector in the 12 months to April 2022 will be 0.9%, up from 0% in the previous
report. The data points to the re-emergence of a two-speed pay market between public
and private sector workers, as occurred in the aftermath of the last financial crisis, which
could re-open tensions between trade unions and government. And while ministers
should take care to ensure that public sector workers are given a fair deal that does not
harm staff morale or add to recruitment and retention pressures, it is important to bear
in mind that the lowest-paid workers are currently far more likely to be private sector
than public sector employees in the UK.
Overall, despite the welcome jump in pay expectations, it remains to be seen whether
the pay award increases will be able to match any increases in the cost of living
caused by higher inflation. The Bank of England’s most recent forecast suggests that
inflation will increase to 2.3% by Q2 2022.2 Looking ahead, a combination of mounting
recruitment difficulties and higher cost of living may soon make pay
inflation a greater concern to the Bank of England.
Taken together, the short-term jobs and pay outlook is more positive
compared with the situation three months ago and closely reflects
the levels of employer optimism about jobs and pay reported before
the pandemic.
Gerwyn Davies, CIPD Senior Labour Market Analyst
2
Monetary Policy Committee. (2021) Monetary Policy Report. London: Bank of England.
3 Foreword from AdeccoLabour Market Outlook Spring 2021
2 Foreword from Adecco
1
A different and unfamiliar course of economic recovery is unfolding as we enter the spring
2 quarter of 2021. The path into the future is unknown; however, the good news in this
quarter’s Labour Market Outlook is that all the indicators of recovery are positive.
3 Most employers responding to our spring 2021 survey told us they have increased
intentions to recruit (64% plan to do so this quarter) and far fewer (only 12%), compared
with the previous 12 months, plan to make any redundancies.
4
Most promising is that the sectors which suffered so badly during the pandemic have
some of the highest employment intentions. It’s encouraging to see hotels, catering,
5 restaurants, arts, entertainment and recreation declare ambitious intentions to recruit.
The net employment intentions balance across all sectors is a strong +27, the highest level
6 since winter 2013. Although the outlook is buoyant, the disruption of Brexit paired with the
lingering threat of COVID-19 means that we cannot expect recovery to go smoothly, so we
must all be committed to levelling up and building back better.
Making the future work for everyone, and especially for those who are looking to enter or
re-enter the world of work, requires a collective effort from schools, colleges, universities
and employers. This takes the form of skills development and improving access to
opportunity. We know that talent is everywhere, but that opportunity isn’t. This time of
regrowth can be used to level up organisation-wide hiring and development with inclusion
and social mobility front of mind.
I hope that the optimism expressed in this report can be channelled into purpose-led
organisational agendas that will strengthen employers in the face of challenges during
recovery. As this report highlights, migration restrictions and a
potential pay gap between public and private sector employees may
pose setbacks along the way. A purpose-led business that is more
innovative, values a healthy work–life balance, provides upskilling and
reskilling opportunities and does what’s right for everyone, will be
more resilient in the critical months ahead.
Alex Fleming, Region President of Northern Europe at Adecco
4 Foreword from AdeccoLabour Market Outlook Spring 2021
3 Key points
1
+27
Recruitment and redundancies
2 • The net employment intentions figure for Q2
+11
has risen sharply to +27 from +11 in the winter
2020/21 report. This is due to both a halving –4 –8 –1
3 of redundancy intentions, down from 20% to Autumn Winter Spring
Spring 2020 2020/21 2021
12%, and a rise in recruitment intentions. The 2020 Summer
2020
improvement has again been driven by the
4 private sector, which saw an 18 percentage point
Net employment score recovery
increase since the last quarter.
5 Healthcare
ICT
Administration
• Healthcare (+54) and ICT (+37) have continued Construction
6 to increase in employment confidence, retaining Hospitality
the top spots among the sectors. But the biggest
climbers this quarter are administration and
support services, which jumped from +2 last
quarter to +33, and hospitality from –6 to +29. Employment confidence by sector
33
• Redundancy intentions have continued to fall 30
over the quarter. Just over a tenth (12%) of
organisations expect to make job cuts in the 22
next three months, down from 20% the previous 20
quarter. The fall takes redundancy intentions to 16
below pre-pandemic levels (16%) for the first time. 12
Winter Spring Summer Autumn Winter Spring
2019/20 2020 2020 2020 2020/21 2021
% of employers to make redundancies
2%
Pay
• Median basic pay expectations have bounced
back to pre-pandemic levels at 2%, having stayed
at 1% over the past four quarters.
Overall median basic
pay expectations
• While the pay outlook for both the private
and public sectors has improved, the picture is 2%
Private sector
looking brighter for private sector workers. The 1.5%
median basic pay award in the 12 months to 0.9%
March 2022 will be 2% compared with 0.9% in Public sector
the public sector. 0%
Pay outlook in the private and
public sectors
5 Key pointsLabour Market Outlook Spring 2021
4 ecruitment and redundancy
R
1
outlook
2 Overall, employment levels appear to have improved this quarter according to the Labour
Market Outlook (LMO). For the second consecutive quarter, this quarter’s net employment
3 balance, which measures the difference between the proportion of employers that expect
recruitment and redundancies to increase staff levels and those that expect to decrease staff
levels in the second quarter of 2021, is in positive territory and has risen to +27 from +11.
4
Figure 1: Decomposition of net employment balance over time
5 100
Decomposition of net employment balance (stacked bars)
5
4 5 4 5 6 8 5 5 5 4 5 5 5 5 10 5 7 7 6
90 11 11 11 11 13 13 13 10 11 9
16 16 12 13 14 15
80 22 29 25
6 70
60 57 53 46 51 51 51 51 53 50
50 49 47 51
49 48 50
50
49 45 44
40
30
20 37 36
30 30 30 32 30 33 33 33 35 33
31 32 27
27 21 24
10 19
0
16
17
17
17
17
18
18
18
18
19
19
19
19
20
20
20
20
21
21
6/
20
20
20
0/
20
7/
20
20
20
20
8/
20
20
20
9/
20
20
20
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02
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Quarter
Increase total staff level Maintain total staff level Decrease total staff level Don’t know
Base: spring 2021, all employers (n=1,045).
The rise in relative optimism is being driven by all three broad sectors, most notably the
private sector, where the net employment balance has increased to +28 from +11. By
comparison, the net employment balance for the voluntary sector is +28 and +22 for the
public sector.
6 Recruitment and redundancy outlookLabour Market Outlook Spring 2021
Figure 2: Overall effect of increasing or decreasing staff over the next three months, by sector
35
1
25
2
15
Net employment balance
3 5
0
4 –5
Total
Private sector
5 –15 Public sector
Voluntary sector
–25
6
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Base: spring 2021, all employers (n=1,045; private: n=756; public: n=211; voluntary: n=78).
Figure 3: Net employment balance, by industry
Healthcare 54
Information and communication 37
Administrative and support service
33
activities and other service activities
Construction 32
Hotels, catering and restaurants/arts,
29
entertainment and recreation
Voluntary 28
Business services (for example consultancy, law, PR,
26
marketing, scientific and technical services)
Manufacturing and construction 24
Finance and insurance 23
Transport and storage 23
Education 22
Wholesale, retail and real estate 21
Public administration and other public sector 18
Primary and utilities 18
Manufacturing 17
Base: all bases > 50. For breakdown of base sizes, see Table 3.
7 Recruitment and redundancy outlookLabour Market Outlook Spring 2021
The sectoral figures make equally dramatic reading, with all sectors reporting relatively
strong employment growth. The net employment balance is highest in the healthcare
1 (+54), ICT (+37) and administration and support services (+33) sectors. Indeed,
employment growth is in positive territory for all sectors of the economy for the first time
2 since the onset of the pandemic.
Recruitment growth gathering pace
3 Mirroring the official statistics,3 this quarter’s findings provide further evidence that the UK
recruitment market may be picking up, with recruitment intentions reaching their highest
levels since the winter 2019/20 report. Following an increase in recruitment intentions
4 in the autumn 2020 and winter 2020/21 reports, this quarter’s findings show that the
proportion of organisations planning to recruit in the three months to June 2021 has risen
5 again to 64%. This is up eight percentage points from the winter and up 11 percentage
points from the autumn. This is also down two percentage points from the winter 2019/20
report, the last report to be published before the onset of the pandemic.
6
While recruitment intentions in the private sector (60%) continue to lag behind the
public sector (81%), hiring in the private sector looks set to accelerate compared with the
previous quarter (51%). Recruitment intentions are highest in public administration and
defence (79%), healthcare (73%) and ICT (67%).
However, the most striking aspect of the data is the sharp increase in hiring intentions
among the worst-affected sectors. Over two-thirds (66%) of hospitality firms plan to recruit
in the second quarter of 2021, up from 36% in the winter quarter. Meanwhile, the proportion
of construction firms with recruitment intentions has increased to 59% from 44% during the
same period, while hiring intentions among administration and support service activities’
employers have jumped from 45% to 63%. More than two-thirds of voluntary sector
respondents (67%) are planning to recruit, which is consistent with recent reports.
Figure 4: Recruitment intentions, by broad sector (%)
90
% of employers planning to recruit in the next three months
80
70
60
50
40
30 Total
Private sector
Public sector
20 Voluntary sector
Spring Summer Autumn Winter Spring Summer Autumn Winter Spring
2019 2019 2019 2019/20 2020 2020 2020 2020/21 2021
Base: spring 2021, all employers (n=1,045; private: n=756; public: n=211; voluntary: n=78).
3
O
NS. Labour market overview, UK: March 2021, Office for National Statistics.
8 Recruitment and redundancy outlookLabour Market Outlook Spring 2021
Redundancy intentions show further sharp fall
While recruitment intentions have ticked up, the proportion of employers intending to
1 make redundancies continues to fall. Just over a tenth (12%) expect to cut jobs during the
next three months, down from 20% in the previous quarter. The fall is consistent across all
2 three major sectors of the UK economy. Indeed, redundancy intentions have fallen below
pre-pandemic levels (Figure 5).
3 The volume of these redundancy intentions represents on average 15% of the workforce,
which is broadly consistent with previous reports. Additionally, the proportion of those
who cannot give an answer as to whether they intend to make redundancies or not
4 has decreased by three percentage points (16%), suggesting that there is slightly less
uncertainty among employers than in the recent past.
5
Figure 5: Redundancy intentions, by broad sector (%)
6 40
35
% planning redundancies in the next three months
30
25
20
15
10
Total
Private sector
5 Public sector
Voluntary sector
0
Spring 2020 Summer 2020 Autumn 2020 Winter 2020/21 Spring 2021
Quarter
Base: spring 2021, all employers (n=1,045; private: n=756; public: n=211; voluntary: n=78).
9 Recruitment and redundancy outlookLabour Market Outlook Spring 2021
5 ay outlook
P
1
Figure 6: Employers’ median basic pay expectations, by business sector
2 2.5
3
2.0
Predicted annual basic pay awards (%)
2.0
1.6
1.5
4
1.0 1.0
5 Public sector
Private sector
0.5
Voluntary sector
6 0.0
Overall net
–0.5
19
19
19
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Base: spring 2021, all employers (n=1,045; private: n=756; public: n=211; voluntary: n=78).
Expected scale of organisational pay reviews
More than three-quarters (77%) of employers surveyed intend to review their wages over
the next 12 months. Around three in ten (29%) employers surveyed intend to review wages
between April and June 2021. Just over a fifth (22%) expect this to be between January
and March 2022. However, the proportion of employers that plan to postpone carrying out
a pay review in the next year remains relatively high (24%).
In a break with the trend in previous reports, pay settlements look set to increase relatively
sharply in the 12 months to March 2022. Employers say that the median basic pay increase
in their organisation (excluding bonuses) will be 2%, up from 1% in the winter 2020/21
quarter. Pay settlements therefore look set to return to pre-pandemic levels.
The pay outlook for private sector workers over the coming 12 months is brighter than
the outlook for public sector workers. The median basic pay award in the private sector in
the 12 months to March 2022 will be 2%, which compares with 1.5% in the winter 2020/21
quarter. By comparison, basic pay expectations in the public sector have increased from
0% to 0.9% during the same period.
Overall, among those who report an expected increase, decrease or pay freeze in the
next 12 months, the proportion of employers predicting a pay freeze is 22%, roughly half
the proportion of employers that were planning to introduce wage freezes in the winter
2020/21 quarter (41%). The fall in the share of organisations intending to freeze pay is
particularly acute among private sector firms, down from 37% in the winter quarter to 16%
in the current spring report.
10 Pay outlookLabour Market Outlook Spring 2021
We also asked survey respondents whether they had made a basic pay award decision in
2021. And consistent with the other survey data, the median basic pay award since the start of
1 2021 was also 2%. The median basic pay award was 2% across the private, public and voluntary
sectors. However, with half (50%) of organisations reporting that they have not conducted a pay
2 review in 2021, considerable caution needs to be applied when interpreting this data.
Figure 7: Distribution of forward-looking pay changes (%)
3
35
31
4 30
25
22
5
% of employers
21
20
15
6 11
10
10
5
1 1 2
1 0
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Bands of pay change
Base: spring 2021, all employers who report an expected increase, decrease or pay freeze in the next 12 months (n=425).
6 urvey method
S
All figures, unless otherwise stated, are from YouGov Plc. The total sample size was 1,045
senior HR professionals and decision-makers in the UK. Fieldwork was undertaken during
2–18 April. The survey was carried out online. The figures have been weighted and are
representative of UK employment by organisation size and sector.
Weighting
Rim weighting is applied using targets on size and sector drawn from the Business Population
Estimates for the UK and Regions 2019. The following tables contain unweighted counts.
Table 1: Breakdown of the sample, by
number of employees in the organisation Table 2: Breakdown of sample, by sector
Employer size band Count Sector Count
2–9 184 Private sector 756
10–49 205 Public sector 211
50–99 81 Third/voluntary sector 78
100–249 103 Total 1,045
250–499 92
500–999 69
1,000 or more 311
Total 1,045
11 Survey methodLabour Market Outlook Spring 2021
Table 3: Breakdown of sample, by industry
1 Industry Count
Voluntary 78
2 Manufacturing and production 153
Manufacturing 82
3 Construction 52
Primary and utilities 19
Education 117
4 Healthcare 67
Private sector services 540
5 Wholesale, retail and real estate 115
Transport and storage 34
Information and communication 51
6
Finance and insurance 66
Business services (for example consultancy, law, PR, marketing, scientific 107
and technical services)
Hotels, catering and restaurants/Arts, entertainment and recreation 70
Administrative and support service activities and other service activities 97
Public administration and defence 81
Police and armed forces 15
Total 1,045
Table 4: Breakdown of sample, by region
Region Count
North-east of England 31
East Midlands 65
West Midlands 57
Scotland 68
London 169
South-west of England 83
East of England 52
Wales 32
South-east of England 133
North-west of England 73
Yorkshire and Humberside 63
Northern Ireland 13
12 Survey methodChartered Institute of Personnel and Development 151 The Broadway London SW19 1JQ United Kingdom T +44 (0)20 8612 6200 F +44 (0)20 8612 6201 E cipd@cipd.co.uk W cipd.co.uk Incorporated by Royal Charter Registered as a charity in England and Wales (1079797) Scotland (SC045154) and Ireland (20100827) 14Issued: May 2021 Reference: 8143 © CIPD 2021
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