“A poor hire at mid-manager level with a salary of £42,000 can cost a business more than £132,000” - Recruitment & Employment Confederation
With demand for hiring new staff at near record rates and rising, candidate supply remaining stubbornly low and continuing to decline, combined with the average cost of a bad hire being estimated at 30% of that individuals annual salary, it’s easy to recognise that the current candidate job market is increasingly challenging for employers.
Now, more than ever, making the right hiring decisions and implementing a coherent talent attraction strategy is essential to continued business growth.
Key takeaways from this article:
- Demand for permanent placements and temporary billings remains consistently strong, with growth of both rising sharply in October 2018.
- The labour market is increasingly competitive with the availability of candidates falling at its fastest rate since January 2018, due in part to net outflow of migrant workers from the EU.
- The biggest impact of these conditions is an increase in the cost required to attract the best candidates. Businesses are competing in an increasingly challenging job market, including a smaller available talent pool which is also fuelling increasing candidate demands.
- There is a significant cost to your business of making the wrong hire, so even in this challenging labour market, it is vital to not make rushed decisions.
Employer demand in the UK labour market
Both permanent (perm) placements and temporary (temp) billings growth rose sharply in October 2018 in the UK, with perm placements rising at the second fastest rate since March and temp billing growth reaching a five-month high. The KPMG and REC UK report on jobs released last month, found strong demand for perm staff amongst those surveyed, whilst the inability to secure the right candidates for perm roles has had a knock on effect of driving demand for short-term workers.
Despite strong demand across both the public and private sector, data from the Office for National Statistics (ONS) had the number of total vacancies at 845,000 between August and October 2018, up by over 5% from the same period in 2017.
Source: KPMG and REC Report on Jobs (November 2018)
Candidate supply in the UK labour market
The availability of candidates however has fallen at the fastest rate since January, with reductions in the availability of both perm and temp staff, further exacerbating the already competitive market for attracting candidates.
James Stewart, the Vice Chair of KMPG, said recently that “…some clients [are telling] us they are seeing the worst period of staff availability for 20 years”, whilst Kirstie Donelly, managing director of City & Guilds, said “The UK is facing a skills gap crisis which, if it goes unaddressed, could have a disastrous impact on UK businesses”.
Add to this the significant net outflow of migrant workers from the EU, fuelled by the UK’s upcoming exit of the European Union, the picture for attracting the right candidates becomes increasingly challenging.
What does this mean for you?
The biggest impact that employers will be feeling in the current environment is the increase in salaries for perm workers, and hourly and daily rates for temps.
The KPMG and REC report on jobs highlights that firms have had to raise their salary offers to attract the best candidates, whilst recruiters have offered a similar view for temporary workers with higher rates of pay having to be offered in order to secure workers.
ONS data for November 2018 shows that, in comparison to 2017, wages excluding bonuses have risen by 3.2%.
It’s clear from these research and statistics sources that businesses are having to spend more to get workers in, whilst working within a smaller available talent pool and negotiating increasing candidate demands.
Despite this, not making the wrong hiring decision for your business is vital. Forbes found that ‘about one in four hires [are] a complete mis-hire, with the majority of hires being merely workable’. Whilst The REC found last year that a third of employers believe these mistakes, these mis-hires, cost their business nothing.
Is this true?
Well, Oxford Economics estimates that on average it costs £30,000 to replace that member of staff, and the REC estimates that a poor hire at mid-manager level with a salary of £42,000 can cost a business more than £132,000 with wasted costs covering salary, training, staff turnover and lost productivity as areas that are effected.
Resourcing consideration tips
- Are you considering your employer brand? (Tip: define a clear and consistent business message, review and understand your brand’s perception across business review platforms and provide a top-of-class candidate experience, for all candidates)
- Does an inclusive hiring strategy underpin everything you do in the market? (Tip: make your brand accessible and considerate, as well as open to accessing hidden talent pools)
- Have you reviewed your end-to-end hiring process? (Tip: look specifically at the length of your process in terms of stages, and identify areas for using innovative hiring tools)
- Do you manage your external talent pipeline? (Tip: have you considered creating a talent pipeline of candidates that fit your business for future role vacancies)
- Are you measuring your candidate experience? (Tip: candidate experience can have a significant impact on the way your business is perceived in the market and how it performs, here Guidant take a closer look at the importance of candidate experience)
- Have you chosen the right supply chains partners? (Tip: are your partners accessing the right talent for your business, and do they share your business values?)
Can Guidant help in these challenging times?
Guidant support our clients by facilitating faster time-to-hire, bespoke recruitment processes and strategies but we are also committed to getting our clients the workers that are right for their business.We understand the cost of a bad hire, and how this can negatively impact business growth.
Challenging market conditions doesn’t simply mean you need to make a hire that might not be right for your business. We believe there is a better way to do recruitment that moves away from the industry mentality of ‘recruitment by numbers’. We take a wider perspective, by shifting the focus to people. We’re not just matching a job specification, we’re working to identify and truly understand what your business needs, and finding the best people to match this fit. Through this approach we continue to help our clients to make the right hiring decisions so they continue to sustain business growth even in these difficult economic and hiring conditions.