Employer Update 2021: The Current State Of The UK Labour Market

Pre-COVID-19, the Digital Revolution was arguably the main threat to jobs, with increasing automation and AI in almost every industry expected to impact millions of jobs.


With roles evolving, employers faced a shortage of workers with the right skills, and Brexit compounded the issue as the talent pool has grown smaller due to less freedom of movement. On top of these challenges, the COVID-19 pandemic hit, and businesses across the UK were forced to shut, with many unable to recover even once lockdowns had been lifted. Workers lost their jobs or were furloughed, and in the best-case scenarios work went on as normally as it could, with compulsory working from home scenarios.

With the economy opening back up again, the number of employees on furlough is going down, with 1.9 million jobs on furlough at the end of May 2021 compared to 4.9 million jobs in January, according to a Parliamentary research briefing. As business returns to a new normal, statements like ‘UK employers struggle with worst labour shortage since 1997’ are hitting the headlines and jobs postings are at a record high, with over 1 million vacancies in the UK, according to Bloomberg. Additionally, wages for blue collar workers are on the rise, a trend seen pre-pandemic, as companies struggle to find workers to fill these vacancies in a difficult market.

Skills gaps and labour shortages

Although a large part of the current labour shortage is in blue collar sectors like construction, hospitality, catering and manufacturing, many other sectors are feeling the pinch too. Employees in white collar jobs are re-examining their options in the post-pandemic jobs market, as businesses try to entice skilled workers with better wages, enhanced benefits packages and improved working conditions. Microsoft’s 2021 Work Trend Index found that 40% of workers were considering leaving their employers this year, with almost half (46%) planning to make a ‘major career pivot or transition’ and that same number saying they are likely to move because they can now work remotely.

Staffing shortages and immense competition for workers has meant that in order to stay ahead of the curve, companies that previously paid minimum wages have had to revisit their compensation and pay packages. McDonalds for example, which has often been criticised for its pay levels, has announced it is raising its wages. This may also put its franchisees and other companies in the fast-food sector under pressure to follow suit.

What this means for employers

There is a rising demand for new skill sets, with a majority of the growth being concentrated in higher-wage jobs. Closing this skills gap is a struggle and employers need to be innovative in their approach to fill their needs. On the plus side, companies are increasingly looking for transferrable skills in favour of past job titles and degrees, a move that can broaden the candidate pool.

What this means for job seekers

Evolving job roles will mean that many employees may have to change not just jobs, but industries. While this can seem daunting for those without formal training or a university degree, it can also be an opportunity to reskill and get on the pathway to better wages and a more fulfilling career. Employers are increasingly looking for applicants with decision making, critical thinking, leadership, digital and analytical skills, so strengthening their competencies in these areas can boost candidates’ career prospects.

How employers can attract and retain the best talent

The high demand for qualified employees has tipped the scales in favour of the job seeker. With working lives turned upside down for many, the pandemic encouraged many workers to reassess their lives and reflect on what they want from their careers. HR Review reports that over a quarter (26%) of the UK workforce is considering changing careers to complement their transferrable skills, with a further 18% considering learning entirely new skills. It also found that employees are looking for jobs that offer:

  • Excellent compensation and benefits
  • Job security
  • A motivating and appreciative workplace culture
  • Flexibility

A May 2021 analysis by the Office for National Statistics (ONS) on the future of homeworking found that 85% of adults working from home would prefer a hybrid work scenario of both home and office in the future. So, in a tight labour market, employers offering a blend of flexible working arrangements which support better work-life balance could gain an edge over their competitors. Remote working adds another benefit too – employers can effectively widen their search areas for talent that meets their needs, without necessarily having to invest in expensive relocation costs, as well as reducing office overheads.

Along with flexible working, providing a great benefits package can go a long way towards making your employees feel motivated and appreciated. Check out our Top Employee Benefits In 2021 blog for ways to enhance your benefits package.

Another option for employers to consider is recruiting within the organisation by providing employees with the tools and resources they need to upskill. This can help reduce costs involved with new hires and gives employees who are already invested in your company a chance to grow.

Businesses need to have an effective recruitment strategy in place to find the right talent. Enhancing your employee value proposition (EVP) and building a positive company culture can go a long way towards attracting the right talent for your business, and making sure that potential candidates hear about what you have to offer is essential too - read our blog for advice on recruiting in challenging times.

We know how to reach out to the right candidates and to sell the benefits of your company to them. We can put the right people on your team and give you the support and resources you need to keep them there. To learn more, get in touch with us today.

Discover more employer resources here.

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