The changing labour market
Prompted by the experience of the Covid-19 pandemic many of those in the UK workforce re-assessed their priorities, including their work/life balance, a process that has altered the UK's labour market. Some opted for early retirement, while others pushed for more flexible working arrangements. A considerable number dropped out of the labour market due to the lack of available childcare, whilst mental health difficulties caused some to withdraw from the world of work. Here we look at what employers can do to help attract and retain talent amid the ongoing people and skills shortages crisis.
The pandemic changed perspectives on the balance of work in our lives and the way we lead them. It prompted many in their 50s and 60s, particularly individuals with private pensions and property wealth, to take early retirement. Those still in the workforce are demanding businesses adopt new values of work.
A report published by the Business, Energy and Industrial Strategy (BEIS) Committee has warned that the UK's shrinking workforce is restricting economic growth.
A poll commissioned by the Committee revealed that whilst many workers took early retirement, some individuals would consider returning to work if flexible roles with adequate protections allowed them to continue a semi-retirement.
In addition, the march of technology is leaving many without the requisite skills for the modern workplace leaving many potential workers in need of retraining.
New realities, new approach
Business groups say that new realities demand a new approach. They are calling on the government to play its part in getting people back to work through support with childcare, healthcare and skills.
However, they also acknowledge that businesses must play their part in a revolution in childcare; flexible working policies becoming mainstream; embracing automation; wellness becoming an employer's job; and skills and immigration policies being brought together.
The UK has some of the highest childcare costs in the OECD, with public funding for childcare comprising less than 0.1% of GDP – the second lowest investment in the OECD.
In England, the cost of a part-time nursery place for a child under two grew by 60% in cash terms between 2010 and 2021 – twice as fast as average earnings. This prevents parents from working, especially women who continue to carry the burden of caring responsibilities. However, the Spring Budget saw significant reforms to childcare. Chancellor Jeremy Hunt announced 30 hours of free childcare for every child over the age of nine months with working parents by September 2025.
The funding paid to nurseries for the existing free hours offers will also be increased by £204 million from this September, rising to £288 million next year.
According to Mr Hunt, these measures will remove barriers to work for many parents, reducing discrimination against women and benefit the wider economy in the process.
However, there is still uncertainty about whether these changes will be enough. A recent report carried out by recruitment firm Indeed Flex has suggested that rising childcare costs are keeping mothers from returning to the workplace.
The report found that one third of working mothers spend over 30% of their wages on childcare. Two in five mothers polled said that the government's free childcare expansion will be enough to allow them to go back to work. However, a similar sized proportion of mothers believe that childcare costs are still too high, despite additional government help.
Flexible working to go mainstream
Research from think tank Timewise, shows that nine out of ten people want flexible work, but only three out of ten job adverts offer it.
These numbers put the issue into stark relief for employers who need to embrace the merits of flexible working. Those that do will stand a far better chance of attracting those who have left the workplace, and are now economically inactive, back into the workforce.
According to the business groups, wider use of artificial intelligence (AI) across the UK economy and the adoption of digital technologies by SMEs could create add billions to the country's Gross Added Value (GVA).
They say the UK needs more robotics and AI to help firms deploy the people they have more effectively, as well as take the place of people they are struggling to hire. Those firms that fail to review their use of such technologies will be in danger of getting left behind.
Employers to lead on wellness
Over a quarter of those who are now economically inactive are out of the workforce because of long-term sickness, according to the business groups.
It says that employer-led health interventions, to prevent common physical and mental health risks, could help save £60 billion every year – reducing the impact of ill-health on the UK workforce by up to 20%.
Skills and immigration brought together
Business groups say that the UK needs to work smarter in upskilling and reskilling existing workers and attracting the best talent in the world.
This means migrating the Apprenticeship Levy into a new Skills Challenge Fund, where businesses can invest in accredited training for the variety of skills they know their people need − working alongside a cross-departmental approach to immigration policy.
Clearly, this is a matter for the government, but as shown by the childcare measures in the Spring Budget, the authorities do sometimes listen to businesses and make the necessary changes.
Businesses must think progressively to meet the other requirements discussed in this blog.
To attract and keep the best talent, employers need to update their relationship with their employees. This means constantly evaluating and evolving their offer to their employees and wider talent.
Business groups means a mutual value exchange of what the employee gives and gets that goes way beyond terms and conditions. The return for firms is greater loyalty, discretionary effort and leadership, rather than employees who merely clock in.
Businesses that look to the future must invest wisely using the available government support to develop a skilled and motivated workforce.
We are happy to advise in detail on the best approach to suit your circumstances. Please contact us for more information.