CIPD Labour Market Outlook: the key takeaways

The CIPD’s quarterly Labour Market Outlook (LMO) provides an excellent data-driven insight into businesses’ view of emerging pressure points expected to impact them over the next few months. With the CIPD’s forecast for Q1 released, let’s take a look at some of the key takeaways for businesses. 

Rising employment costs are a key concern for business

Rising costs remain a source of concern for businesses with “one in four (25%) employers planning on making redundancies in the next three months”. This figure is the highest level recorded in a decade, except for during the pandemic, and is partly driven by the National Insurance Contributions increase and the reduction in the "secondary threshold". As a result, businesses could be rethinking their workforce plans for the year ahead.

Pay outlook is muted

Employers are also adopting a moderate approach to pay rises, with the median expected basic pay increase for the next 12 months remaining at 3% across all sectors for the fourth successive quarter. This figure is also lower than it has been in previous years. In the public sector, the average expected pay rise has fallen to 2.5%.

Retail and hospitality sectors likely to be hardest hit

Facing rising employment costs and greater pay restraint, the retail, hospitality and some education businesses are set to be the hardest hit. 45% of hospitality respondents stated that they were likely to reduce the number of employees through redundancies and/or recruiting fewer workers, with 39% of retail firms doing the same. Some businesses in the education, manufacturing and construction sectors also expressed concern that jobs could be affected.

46% of hospitality businesses also reported that they may need to reduce the hours worked by staff, followed by 24% of respondents in the retail sector. Some also suggested they could cut training expenditure.

Recommendations for employers

Where businesses have limited budgets for pay rises, using this budget wisely and efficiently is crucial. Carrying out a thorough pay analysis linked to performance and incorporating pay benchmarking can help employers better assess which areas of their business should be prioritised. At the same time, ensuring your employer value proposition (EVP) is relevant and attractive to your people becomes even more important; career progression, exposure to new learning and dedicated development opportunities can help retain your best talent.

Whether planning for redundancies or managing tight salary budgets, our experts can help your business navigate today’s complex business landscape. For more information, please contact Kerri Constable.