When it comes to hiring, businesses have been caught negotiating a hot jobs market that’s starting to cool. And it’s a huge problem.
The unemployment rate – which sat at an estimated average 3.6% for July to September 2022 – is near its lowest level for close to 50 years. It’s the result of a red-hot labour market that saw candidates presented with an abundance of new job opportunities as businesses played Covid catch-up from the end of 2020 onwards.
“I’ve never seen such a busy, buoyant market,” says Charlotte Pember, director at legal recruitment firm Taylor Root. “It was unbelievable.”
Yet the Bank of England isn’t expecting unemployment to stay at these lows for long. By the end of 2023 it is set to hit 4.9%, while by the end of 2025 it is forecast to jump to 6.4%. Similarly, while the number of roles available remains high post-pandemic, vacancies fell for the fourth consecutive period across August to October 2022.
Recruiters spoke to NerdWallet about the jobs boom across 2021 and the start of 2022. But Pember says that “the taps have been turned off” since the summer. “Now we are seeing that things are very quiet,” she adds.
You might think that a cooling market would benefit businesses looking to hire. However, this transition between a hot and cold labour market has left organisations potentially facing two sets of challenges at once: rising salaries and competition for candidates on the one hand, and tightening budgets and a dearth of experienced talent on the other.
So where does this leave businesses looking to grow, expand or fill existing positions?
Rising salaries and tightening belts
The tight labour market in 2022 – where jobs are plentiful and workers are not – has pushed up salaries and left businesses struggling to fill roles.
Now, as the recession takes hold and businesses start to tighten their belts, there is a gap between what they can pay and what candidates expect, an issue exacerbated on both ends by the cost-of-living crisis.
In the legal industry, “salaries went up by about 30% over the last 18 months,” says Pember, “but we don’t expect salaries to be going up in this market.”
And it’s not just in the legal industry. “The jump in pay clients were willing to offer has really clamped down,” says Max Tullis-Turner, practice lead at recruitment specialist Blue Pelican, an agency working in a range of sectors, including marketing and tech. “But candidates still have the expectation that they are worth £10,000 more than they are.”
If there are difficulties aligning on salary, businesses may not be able to come to an agreement with those top tier candidates. As Tullis-Turner goes on to note, if you are looking for a “poster person” to make a difference at your company, you need to pay “poster person money”.
Better the job you know than the one you don’t
Even for businesses that are able and willing to pay higher salaries, there may not be the candidates out there to fill those roles. “Economic uncertainty will make people nervous about leaving a stable position in a business that’s doing well,” explains Colin Doree, head of recruitment at Blue Pelican.
And if people are less likely to switch roles, that leaves the job market with a dearth of experienced candidates.
“The demand is for solid experience,” says Pember, describing candidates who have been working in an industry for years and can bring expertise to a business. “But there’s nervousness in the market about what’s going to happen in the next 12 months. If you’re bright, and at a good firm, you won’t be looking to jump ship in this market.”
For businesses, it’s not just about filling vacancies, especially with the cost of hiring someone in the UK so high. It’s also about finding the right fit for what they need. And while graduates and less experienced candidates can be a shot in the arm for a business, it may also delay growth, as it takes time to foster the expertise needed to push an organisation to the next level.
What can businesses do to attract the right talent?
Whichever way you slice it, hot or cold, it’s a tough time to be a business looking to hire. So what can companies do to stand out?
On one point, the advice from the recruiters we spoke to was unanimous: the need for consistency. Just as important as the questions you ask in an interview, is how efficiently you structure the process and how quickly you get back to candidates.
“Businesses should keep up the same levels of responsiveness and quality you would have in a positive market, as you always want to be seen in a positive light,” says Pember.
It’s by keeping up this consistency that smaller businesses may be able to make themselves stand out, when bigger companies – whether that’s global law firms or mega-corps such as Meta and Twitter – are pulling back.
It is also important to be upfront about what the job is, what you are offering and, crucially, why the candidate should choose you.
“Post-Covid, a lot of people are more interested in their work/life balance,” explains Tullis-Turner, “but they also want a job that is meaningful and has an impact.” Therefore, if you don’t have that immediate brand recognition, what are you offering the candidate in terms of challenges and progression?
If you can justify why a candidate should come to you, you can start to assuage any fears they might have about changing jobs in such uncertain times. On this, Blue Pelican’s Doree is firm: “Chances are [candidates] don’t know how safe your environment and opportunity is. No-one wants to be last in, first out. So there’s got to be some form of evidence or communication which shows how stable an environment you can offer.”
Image source: Getty Images
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