Want more pay? Go to the office 5 days a week
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Want more pay? Go to the office 5 days a week

UK employers start to get creative with incentives amid severe labour shortage

Workers walk outside offices at the Spinningfields Estate in Manchester,  England. (Photo: Bloomberg)
Workers walk outside offices at the Spinningfields Estate in Manchester, England. (Photo: Bloomberg)

LONDON: British companies are starting to pay a “five days in the office” premium to lure in staff who have retained bargaining power because workers are in such short supply, the country’s biggest recruitment agency says.

James Reed, chairman of the recruitment firm Reed, said employers are having to lift wages most in industries such as hospitality, manufacturing and healthcare where there’s less flexibility to work from home.

“Pay rates for workers who are required to attend physically the workplace five or more days a week have risen quite significantly,” he said in an interview. “Employers are having to pay more to get them to do it.”

The remarks underscore the difficulty employers are having in finding and keeping staff after at least 600,000 people dropped out of the workforce during the pandemic. Wages are rising at near-record rates because workers are in short supply even though the economy is headed into recession.

Britain’s decision to leave the European Union and the pandemic exacerbated those trends by reducing immigration that used to fill many low-skill jobs and building an expectation that many office workers can work from home much of the time. 

The problem is most acute in the National Health Service, hospitality and catering, where wages have historically lagged other sectors and workers can’t do their job remotely. 

While overall pay is up 6.8% year-on-year across job postings on Reed’s website, it has jumped 12.9% in health and medicine, 10.6% in hospitality and catering and 14.6% in manufacturing as the offer of hybrid working tempts applicants elsewhere.

The decline in the size of the UK’s workforce means that those people who are applying for jobs can ask for more flexibility and benefits. That’s tilting power in the economy away from capital and toward labour for the first time in decades. 

Wages are rising rapidly, hitting 7.2% in the private sector in the three months to November when excluding bonuses. Outside the pandemic, that was the sharpest gain on record and has emboldened workers to make ever more extravagant demands. 

“It’s not just money,” said Liz Martins, UK economist at HSBC. “It’s also other demands around flexibility and those kinds of things. One of our customers said they’d had a request from a candidate for one ‘duvet day’ per month on top of their annual leave.”

A “duvet day”, common in UK and US workforces, is a day that an organisation agrees an employee can take off without advance notice.

“They were laughing about it, so perhaps the candidate wasn’t successful, but in this labour market you really don’t know,” said Ms Martins.

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