LABOUR MARKET OUTLOOK - CIPD

AUTUMN 2011
LABOUR
MARKET
OUTLOOK
PART OF THE CIPD OUTLOOK SERIES

CIPD OUTLOOK SERIES
The Labour Market Outlook is part of the CIPD Outlook series, which also includes the Employee
Outlook and the HR Outlook. Drawing on a range of perspectives (and with the opportunity to
compare data across our regular surveys), this triad of research enables the CIPD to offer unique
insight and commentary on workplace issues in the UK.
OTHERS IN THE SERIES
AUTUMN 2011 2010
EMPLOYEE
OUTLOOK
PART OF THE CIPD OUTLOOK SERIES
AUTUMN 2010 2011
HR
OUTLOOK
PART OF THE CIPD OUTLOOK SERIES
EMPLOYEE OUTLOOK
The Employee Outlook provides a quarterly update
on the attitudes of employees in the UK and
the HR challenges facing employers. It regularly
covers attitudes towards management, work–life
balance, workload and pressure, communication
and bullying and harassment.
cipd.co.uk/employeeoutlook
HR OUTLOOK
The HR Outlook provides valuable insight and expert
commentary on the HR profession. It explores the
size and shape of HR functions, comments on
the capabilities of HR professionals and outlines
emerging trends and future priorities.
O
cipd.co.uk/hroutlook

LABOUR
MARKET
OUTLOOK
PART OF THE CIPD OUTLOOK SERIES
Summary 2
Recruitment, retention and redundancy outlook 3
Migration outlook
UT
9
Skills outlook 11
Pay outlook 12
Offshoring outlook 14
Research methodology 15
Respondent profile 16
cipd.co.uk/labourmarketoutlook 1

AUTUMN 2011
Summary
The quarterly CIPD Labour Market Outlook (LMO) provides a
set of forward-looking labour market indicators, highlighting
employers’ recruitment, redundancy and pay intentions.
The survey is based on 1,021 HR professionals, some of
whom are drawn from the CIPD’s membership of more than
135,000 HR professionals. For the purpose of this report we
have referred to these respondents as LMO employers.
The latest report shows that the labour market will
continue to weaken in the next three months. The LMO
net employment balance score (that is, the overall effect of
recruiting new staff and making redundancies) has fallen
from –1% to –3% since the summer quarter. This is the
second successive quarterly fall and the lowest net balance
since last winter.
As indicated in recent LMO reports, the private sector
is showing a strongly positive but steadily falling net
employment balance (+20%) while the public sector is
showing a strongly negative net balance (–50%). The LMO
survey thus suggests a continuation of the trend that has
emerged in official statistics during the course of 2011,
with the rate of growth in private sector jobs slowing and
becoming insufficient to offset public sector job losses.
Therefore, although there is nothing in the LMO survey
findings to suggest that a marked fall in private sector
employment is imminent, it is nonetheless likely that
unemployment will continue to rise for the time being.
O
2 cipd.co.uk/labourmarketoutlook

LABOUR MARKET OUTLOOK
Recruitment, retention and
redundancy outlook
Employment prospects are set to weaken further. This
quarter’s net employment balance score – which measures
the difference between the proportion of employers who
expect to increase staff levels and those who expect to
decrease staff levels in the fourth quarter of 2011 – has
fallen to –3% (Figure 1).
Figure 1: Correlation between LFS unemployment statistics 1 and LMO data
Base: All LMO employers likely to recruit or make redundancies in the next quarter (n=661)
50
45
40
35
30
25
20
15
10
5
2
0
–5
–10
–15
–20
UT
x x x x x
–3
–10
–5
5
2
x
11
x
Maintain staff levels
Increase staff levels
Decrease staff levels
Number of unemployed people
Net
x
x
3
–3 –3
x
–1
x
3,000,000
2,750,000
2,500,000
2,250,000
2,000,000
1,750,000
–25
Summer 09
Autumn 09
Winter 09–10
Spring 10
Summer 10
Autumn 10
Winter 10–11
Spring 11
Summer 11
Autumn 11
1,500,000
1
Labour Force Survey data taken at quarterly intervals based on GB population aged 16+: spring (February–
April), summer (May–July), autumn (August–October), winter (November–January).
Please note the unemployment figure for autumn is taken from the ONS estimates for three months to
August 2011, not LFS data. Hence, the figure for unemployed people in autumn 2011 needs to be treated
with caution as it only covers the first month of the autumn quarter.
cipd.co.uk/labourmarketoutlook 3

AUTUMN 2011
Figure 2: Correlation between LFS employment levels and LMO data 2
Base: All LMO employers likely to recruit or make redundancies in the next quarter (n=661)
50
45
x
Maintain staff levels
Increase staff levels
Decrease staff levels
Overall employment levels (ONS)
Net
29,400,000
40
29,300,000
35
x
30
25
20
x
x
x
x
x
29,200,000
29,100,000
15
10
5
0
–5
–10
x
–10
x
–3
x
–5
5
x
2
11
3
–1
–3 –3
29,000,000
28,900,000
–15
–20
–25
This is the weakest net balance score since last winter, the
apparent deterioration in the overall demand for labour
reflecting the recent trend in official employment data
(Figure 2).
The net employment balance score remains strongly
positive in the private sector (+20%), though down from
+23% in the previous quarter (Figure 3). However, the net
employment balance is very strongly negative in the public
sector (–50%). The voluntary sector net employment balance
is unchanged from the previous quarter (+7%).
Looking further ahead, the private sector net employment
balance score for the next 12 months has increased from
+19% to +24% since the previous quarter (Figure 4).
The corresponding net employment balance score for the
voluntary sector is also positive but has decreased from
+13% to +9%. The 12-month net employment balance for
the public sector is very strongly negative (–57%).
O
28,800,000
Summer 09
Autumn 09
Winter 09–10
Spring 10
Summer 10
Autumn 10
Winter 10–11
Spring 11
Summer 11
Autumn 11
28,700,000
28,600,000
2
Labour Force Survey data taken at quarterly intervals based on GB population aged 16+: spring (February–
April), summer (May–July), autumn (August–October), winter (November–January).
Please note the unemployment figure for autumn is taken from the ONS estimates for three months to
August 2011, not LFS data. Hence, the figure for unemployed people in autumn 2011 needs to be treated
with caution as it only covers the first month of the autumn quarter.
4 cipd.co.uk/labourmarketoutlook

LABOUR MARKET OUTLOOK
Figure 3: Overall effect of recruiting new staff and/or making redundancies in next three months (%)
Base: Autumn 2011 all likely to recruit or make redundancies in the next three months: overall (n=661),
private sector (n=384), public sector (n=194) and voluntary sector (n=83)
Public sector
Private sector
Voluntary sector
30
10
–10
0
Overall net
20
18
5
–3 –5
39
32
26
29
19
11
12
5
3
6
3 2
3
–7
–3
23
20
7 7
–1
–3
–30
–13
–31
–50
–43
–35
–44
–52
–51
–50
–70
Autumn 09
Winter 09–10
UT
Spring 10
Summer 10
Autumn 10
–66
Winter 10–11
Spring 11
Figure 4: Overall effect of recruiting new staff and/or making redundancies in next 12 months (%)
Base: Autumn 2011 all likely to recruit or make redundancies in the next 12 months: overall n=661,
public n=194, private n=384, voluntary n=83
40
20
0
–20
–40
29
7
2
–50
19
13
–6
Summer 11
24
9
–2
Autumn 11
Public sector
Private sector
Voluntary sector
Overall net
–60
–58 –57
Spring 11
Summer 11
Autumn 11
cipd.co.uk/labourmarketoutlook 5

AUTUMN 2011
Recruitment intentions
Recruitment intentions overall have fallen significantly
since the last quarter (with 66% of employers intending to
recruit compared with 71% in the summer), though the fall
is mainly the result of much weaker recruitment by LMO
employers in the voluntary sector (Figure 5). LMO employers
who intend to recruit on average expect 74% of new recruits
to be full-time staff and 26% to be part-time staff.
A quarter of LMO employers (24%) do not expect to recruit
staff into any roles in the next 12 months, this proportion
being much higher in the public sector (30%) than the
private sector (21%). Where recruitment is expected,
demand will be relatively strong for a number of job roles,
notably business development staff (19%), accounting and
finance staff (19%), administrative staff (16%) and sales and
marketing staff (16%, Figure 6).
Figure 5: Recruitment intentions, by sector (%)
Base: Autumn 2011: public n=296, private n=601, voluntary n=124
Public sector
100
Private sector
90
80
70
60
50
40
30
20
71
69
59
Summer 09
76
74
59
Autumn 09
83
70
57
Winter 09–10
77
70
62
Spring 10
71
63
60
Summer 10
Voluntary sector
82
74
69 70
70
74
67
64
63
51
61 60
45 43 44
Autumn 10
Winter 10–11
Spring 11
Summer 11
Autumn 11
O
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LABOUR MARKET OUTLOOK
Figure 6: Roles in more demand within organisations in the next 12 months (%)
Base: All LMO employers (n=1,021) *Only responses over 5% listed
No more demand for any roles
24
Business development
Accounting/finance staff
Secretaries, personal assistants,
admin assistants & office support
Sales and marketing
16
16
19
19
Management/executives
Human resources (HR)
Other
IT staff
14
14
14
14
Engineers
12
Skilled trades workers
UT
0 10
Technicians
Care/social workers
6
7
8
Percentage
20 30
cipd.co.uk/labourmarketoutlook 7

AUTUMN 2011
Redundancy intentions
A third of LMO employers expect to make redundancies
over the next three months. The proportion is highest in
the public sector (48%), though the figure has fallen in
all three broad sector categories since the summer (Figure
7). However, there has been an increase in redundancy
intentions in manufacturing and production (Table 1).
Figure 7: Redundancy intentions, by sector (%)
Base: Autumn 2011: public n=296, private n=601, voluntary n=124
60
Public sector
Private sector
50
Voluntary sector
40 36
38
36
33
36
30
30
30
29
34
27
29
20
10
0
23 23 24 24
Summer 09
Autumn 09
Winter 09–10
Spring 10
Table 1: Redundancy intentions, by industry (%)
Summer 10
56
52
51
51
41
43
42
36 30
29
27
22
Autumn 10
Winter 10–11
Spring 11
Summer 11
Autumn 11 Summer 11 % difference
48
33
O
25
Autumn 11
Public administration and defence (n=133) 64 65 –1
Voluntary and not-for-profit (n=118) 35 40 –5
Manufacturing and production (n=154) 34 31 3
Healthcare (n=81) 32 34 –2
Education (n=107) 27 51 –24
Private sector services (n=428) 24 25 –1
8 cipd.co.uk/labourmarketoutlook

LABOUR MARKET OUTLOOK
Migration outlook
The proportion of LMO employers who are planning to recruit
EU and non-EU migrant workers in the next three months
(19%) is lower than the last two quarters (summer 2011 at
25% and spring 2011 at 22%). This is the lowest figure since
autumn 2010, the subsequent fall being particularly marked in
the private sector (Figure 8).
Seventeen per cent of LMO employers are planning to recruit
EU migrant workers, with one in ten intending to recruit
non-EU workers. Among those planning to recruit migrant
workers, 36% are planning to do so from overseas and/or
73% from migrant workers already based in the UK. Around
one in six (15%) are not sure where they will recruit migrant
workers from.
35
30
25
20
15
10 9
7
5 6
0
UT
21
Figure 8: Proportion of organisations planning to recruit migrant workers (%)
Base: Autumn 2011: public n=296, private n=601, voluntary n=124
Winter 09–10
15
Spring 10
Public sector
Private sector
Voluntary sector
Overall net
22
18
18
17
17
9
7
6
Summer 10
Autumn 10
24
22
20
18
Winter 10–11
28
22
20
14
Spring 11
32
25
15
13
Summer 11
23
19
12
Autumn 11
cipd.co.uk/labourmarketoutlook 9

AUTUMN 2011
When asked what areas non-EU migrant workers would
be recruited into, 18% said HR followed by IT staff (15%),
management/executives (14%) and researchers (14%). For EU
workers, the areas stated were technicians (15%), caretakers/
cleaners (12%) and sales and marketing (12%).
LMO employers seem more likely to recruit non-EU migrant
workers because of their work experience and because they are
more affordable (36% and 25% compared with 26% and 18%
respectively). EU migrant workers tend to be recruited more for
their better work ethic (34%), better qualifications (23%) and
language skills (18%, Figure 9).
Figure 9: Reasons to recruit migrant workers (%)
Base: Employers who plan to recruit migrant workers
Better job-specific, practical or technical skills
56
61
More work experience
25
36
Other
36
36
Better prepared for work
Better work ethic
More affordable
Better qualifications
18
16
26
27
26
23
32
34
EU migrant workers (n=132)
O
Language skills
11
18
Non-EU migrant workers (n=83)
Better generic or soft skills
(for example, oral communication, teamworking)
8
13
0 10 20 30 40 50 60 70
Percentage
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LABOUR MARKET OUTLOOK
Skills outlook
Forty-two per cent of LMO employers currently have vacancies
that they are finding hard to fill. This figure rises to 70%
among those who say they intend to recruit migrant workers
in the next three months. Manufacturing and production and
healthcare are the sectors reporting greatest difficulty in filling
vacancies (Table 2).
Similar proportions of employers from the private and public
sectors report having vacancies that are hard to fill (44%
private sector, 39% public sector). Two-thirds (69%) of
LMO employers with vacancies that are hard to fill say this is
because of a lack of skills. This equates to a mean average of
49% of vacancies (or 50% median average). Vacancies for
engineering staff and management/executive staff are cited as
the most difficult to fill (Figure 10).
Table 2: Proportion with vacancies that are hard to fill, by industry (%)
UT
Figure 10: Vacancies that are hard to fill (%)
Base: Employers with vacancies that are hard to fill, n=334
Engineers
Management/executives
Sales and marketing
IT
Skilled trades workers
Accountants/finance
Technicians
Care/social workers
Business development
Human resources
Nurses
Legal
19
23 24
14
Option not included in previous waves
11
11 13
10
19
15
9
Option not included in previous waves
8
Option not included in previous waves
6 7 6
7
Option not included in previous waves
6
Option not included in previous waves
5 5
4
3 5
7
7
9
12
0 10 20
30 40
Percentage
Autumn 11 Summer 11 % difference
Manufacturing and production (n=154) 56 55 1
Public administration and defence (n=133) 40 49 –9
Private sector services (n=428) 40 46 –6
Healthcare (n=81) 56 46 10
Voluntary and not-for-profit sectors (n=118) 33 35 –2
Education (n=107) 26 26 0
Healthcare figures need to be treated with caution due to a small base size in summer 2011
*Only responses over 5% listed
Autumn 2011
Summer 2011
Winter 2010
50
cipd.co.uk/labourmarketoutlook 11

AUTUMN 2011
Pay outlook
More than three-quarters (77%) of LMO employers are
planning a pay review by August 2012. Almost a quarter (23%)
intend to postpone their pay review, 5% by between one and
six months and 18% by between seven and twelve months.
Uncertainty is higher within the private sector as to what the
pay review will entail. Forty-three per cent say it is hard to tell
what their pay review will consist of and that it will depend
on their organisation’s performance, while 13% simply do
not know.
LMO employers who predict a pay review between June and
August 2012 are far more likely to say it is hard to tell what it
will entail compared with those who expect a review between
September and November 2011 (44% compared with 19%).
Among LMO employers planning to have a pay review before
August 2012, there is an average expected increase of 1.48%
in their basic pay settlement (excluding bonuses, incremental
increases, overtime and impact of re-grading exercises, Figure
12). This represents a minor decrease from the 1.56% reported
in spring 2011 but is similar to what was reported in the
summer quarter (1.45%).
O
Base: LMO employers who are not postponing a pay settlement (public n=184, private n=457, voluntary n=86)
Figure 11: Likelihood to have a pay increase, decrease or pay freeze (%)
Percentage
100
40
Public
80 38
44
60
12
19
21
18
60
55
Private
57
41
49
56
25
Voluntary
46
36
12
66
Hard to tell;
it will depend on
our organisational
performance
or Don’t know
Increase
Pay freeze
Decrease
20
43
41
35
36
0
1
Autumn
2011
3
Summer
2011
8 5
2 1 1
Autumn
2011
Spring
2011
Summer
2011
7
2
Spring
2011
19
Autumn
2011
19
Summer
2011
23
Spring
2011
12 cipd.co.uk/labourmarketoutlook

LABOUR MARKET OUTLOOK
Along with ‘ability to pay’, ‘inflation’ and ‘productivity and
performance’ remain important determinants of pay increases,
though ‘recruitment and retention’ has decreased in importance
since the summer quarter (Figure 13).
Figure 12: Average predicted annual pay awards (mean), by sector (%)
Base: All planning to have a pay review before August 2012 (all n=356, public n=107, private n=211, voluntary n=38)
4
3
3.11
Voluntary sector
Private sector
Public sector
Overall net
2
1
0
–1
1.62 1.60
1.58 1.55
1.45 1.53
1.23 1.44
Summer
09
Autumn
09
1.99
1.47
0.92
1.99
1.59
2.29
1.46
0.76
0.25
UT
0.79
Winter
09–10
0.98
1.13
Spring
10
1.87
1.52
0.72
Summer
10
Figure 13: Main cause of the expected increase in salaries (%)
Base: All expecting a pay increase
Organisation’s ability to pay
Productivity and performance
Inflation
The ‘going rate’ of pay rises elsewhere
Recruitment and retention issues
Movement in market rates
Pay catch-up following modest pay
increases/freezes/cuts in recent years
Union/staff pressures
National minimum wage
Other
National living wage
Level of government funding/pay guidelines
Shareholder views
2
3
3
8
8
8
7
6
6
7
0 20
22
22
20
18
17
22
30
30
27
Autumn
10
39
38
36
40
45
2.25 2.21
2.06
1.27
0.74
–0.33
Winter
10–11
48
Percentage
54 58
1.56
1.41
0.49
Spring
11
1.45
1.37
0.35
Summer
11
Autumn 2011 (n=206)
Summer 2011 (n=252)
2.07
1.48
1.37
0.31
Autumn
11
60 80 100
cipd.co.uk/labourmarketoutlook 13

AUTUMN 2011
Offshoring outlook
The proportion of LMO employers intending to offshore UK
jobs to other parts of the world has decreased from 10% to
6% in the past year, though it continues to be more popular
with private sector organisations than those in the public and
voluntary sectors. However, the private sector has seen the
largest fall in offshoring intentions, down from 16% in autumn
2010 to 9% in autumn 2011 (Figure 14).
Among those LMO employers intending to offshore jobs in
the next 12 months, 65% intend to offshore to Asia, a third
to Europe and 13% to Africa. Half of LMO employers intend
to offshore to India, a quarter (24%) to Eastern Europe and
19% to Asia excluding India and China. Relatively fewer
employers intend to offshore to North America (7%), the
Middle East (8%) and the rest of Africa (excluding South
Africa, 8%) 3 .
The functions most likely to be offshored are finance and
accounts (cited by 51% of LMO employers) followed by IT
support (39%) and production/operations (29%). Functions
less likely to be offshored are legal services (4%), research
and development (6%) and customer services (13%). 4
Figure 14: Proportion planning to offshore (%)
Base: All LMO employers autumn 2011 (overall n=1,021, private n=601, public n=296, voluntary n=124)
60
50
40
30
20
10
0
–10
Summer 2010
16
9
10
6
0 3 00
Autumn 2010
15
10
3
2
Winter 2010–11
Overall
Private sector
Public sector
Voluntary sector
9
6
2
1
Autumn 2011
O
3
Figures within this paragraph need to be treated with caution due to small base sizes.
4
Figures within this paragraph need to be treated with caution due to small base sizes.
14 cipd.co.uk/labourmarketoutlook

LABOUR MARKET OUTLOOK
Research methodology
On behalf of the CIPD, YouGov undertook this twelfth wave
of the quarterly tracking study looking into views of senior
HR professionals.
HR professionals were defined as currently working in the
roles below and are referred to throughout the report as
LMO employers:
• director
• senior executive/group role
• head of functional area
• HR business partner
• manager
• senior officer
• consultant.
The survey was conducted online using the following sample
sources:
• a sample from the CIPD membership database consisting
of approximately 135,000 members
• YouGov panel of 1,500 senior HR professionals
• an open survey advertised through the CIPD magazine
People Management and a weekly newsletter.
Fieldwork was carried out between 31 August and 10
October 2011 and is weighted to be representative of
industry in the UK in relation to organisation size, sector and
type of business.
The findings are primarily analysed by sector and type of
business. Where patterns emerge, the findings are further
analysed by the size of company and region.
Within the report net scores have been used to display
results. Net scores are calculated by subtracting the
percentage of respondents who say something positive from
the percentage who say something negative. They measure
the strength of the direction of feeling and therefore give a
more accurate assessment than simple agreement scores.
UT
cipd.co.uk/labourmarketoutlook 15

AUTUMN 2011
Respondent profile
(weighted by sector, industry and organisation size)
Respondents by business sector (%)
Spring 11 Summer 11 Autumn 11
Private 62 62 62
Public 31 31 31
Voluntary/not-for-profit 7 7 7
Respondents by business type (%)
MANUFACTURING AND PRODUCTION 14 14 14
Agriculture, forestry and fishing 0 0 0
Manufacturing 9 9 9
Construction 2 2 3
Mining and extraction 0 1 0
Energy and water supply 1 1 1
EDUCATION 6 5 5
Primary and secondary schools 1 2 1
Further and higher education 4 3 4
HEALTHCARE 8 8 8
NHS 5 6 5
Other private healthcare 3 2 3
VOLUNTARY AND NOT-FOR-PROFIT SECTORS 6 6 6
PRIVATE SECTOR SERVICES 52 51 52
Hotels, catering and leisure 2 2 2
IT industry 3 3 3
Transport and communications (including media) 4 4 4
Consultancy services 15 14 15
Finance, insurance and real estate 9 9 9
Wholesale and retail trade 7 6 7
Other business services 12 12 12
PUBLIC ADMINISTRATION AND DEFENCE 16 16 16
Public administration – central government 5 6 5
Public administration – local government, including fire services 8 7 8
Armed forces 1 1 1
Quango 2 2 2
Spring 11 Summer 11 Autumn 11
O
16 cipd.co.uk/labourmarketoutlook

LABOUR MARKET OUTLOOK
Region/nation to which response relates (%)
Spring 11 Summer 11 Autumn 11
North 11 15 14
North-west of England 4 6 7
North-east of England 3 4 4
Yorkshire and Humberside 4 5 4
Midlands 9 12 13
West Midlands 5 3 5
East Midlands 2 4 5
UT
Eastern England 2 4 4
South 34 33 33
London 16 14 15
South-west of England 6 7 7
South-east of England 11 13 11
Scotland 10 7 6
Wales 4 4 3
Northern Ireland 4 2 2
Channel Islands 0 0 0
All of UK 28 27 28
Respondents by employer size (%)
Number of employees Spring 11 Summer 11 Autumn 11
1–9 13 13 13
10–49 6 6 6
50–99 5 5 5
100–249 13 11 11
250–499 5 7 8
500–999 9 9 9
1,000–4,999 19 19 19
5,000–9,999 10 10 10
10,000–19,999 7 7 7
20,000 or more 13 13 13
cipd.co.uk/labourmarketoutlook 17

Chartered Institute of Personnel and Development
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Tel: 020 8612 6200 Fax: 020 8612 6201
Email: cipd@cipd.co.uk Website: cipd.co.uk
Incorporated by Royal Charter Registered charity no.1079797
O
Issued: November 2011 Reference: 5710 © Chartered Institute of Personnel and Development 2011