Survey reveals UK employers are increasingly relying on bidding wars to retain staff

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In an interesting contradiction to recent reports suggesting a cooling labor market and easing wage inflation, a new survey reveals that UK employers are increasingly engaging in bidding wars to retain their staff. According to the survey conducted by the Chartered Institute of Personnel and Development, 40% of employers have made counter-offers in the past year to keep employees who have received job offers elsewhere. More than half of these employers have used counter-offers more frequently than in the previous year, and a quarter of them expect to continue using this tactic in the future.

The survey, conducted in June and early July, indicates that UK employers are struggling to fill positions despite the weak economic backdrop, resulting in rapid wage growth. This finding comes just before the release of official labor market data, which will shed light on the future direction of wage growth. The Bank of England, which recently raised interest rates to 5.25%, is closely monitoring labor market conditions and wage growth for signs of persistent inflationary pressures that may necessitate further rate increases.

While recent data points to a cooling labor market, with rising unemployment rates, falling vacancies, and fewer reports of labor shortages, wage growth has not yet slowed down. In May, wage growth was at approximately 7%. The CIPD’s net employment balance, which measures the difference between employers expecting to increase staff headcount and those expecting to cut staffing in the next three months, remains steady at 28, and the number of employers planning redundancies remains low.

Over 40% of employers reported difficulties in filling vacancies, particularly in the education, transport, storage, and public sectors.

The survey also found that the median expected increase in basic pay remains at 5%, the highest since 2010. However, a growing number of employers are unsure about continuing to raise pay, as it will depend on their organization’s performance. Jon Boys, senior labor market economist at the CIPD, warns that the increasing use of counter-offers can lead to issues such as pay gaps, equal pay challenges, and decreased employee engagement. While counter-offers are most prevalent in London, employers recognize that they have a short-term impact and are less effective in retaining staff over the long term.