CIPD/KPMG Labour Market Outlook

LABOUR MARKET OUTLOOKFigure 3: Overall effect of recruiting new staff and/or making redundancies by sectorPublic sectorPrivate sectorVoluntary sectorOverall net302919392610–10–3–20–135UTThe LMO survey also suggests that employment willcontinue to fall over the next 12 months, with this quarter’snet employment balance falling to –9 from –3. Again,employment prospects in the public sector weigh on thisfigure, with more than three-quarters (76%) of public sectorrespondents reporting that they will be employing fewerstaff in December 2011.–30–50–70Spring 09–30Summer 09–28Autumn 09–31Winter 09–10–43Spring 10–35Summer 10–44Autumn 10Winter 10–11–66cipd.co.uk/labourmarketoutlook 5

WINTER 2010–11Redundancy intentionsincrease for all sectorsAccording to the LMO survey, the first quarter of 2011may see a rise in redundancies across all sectors of theeconomy, which is in line with the increase in the numberof redundancy-related calls the CIPD received to its legalhelpline in the final quarter of 2010.of private sector companies reporting that they planned tomake redundancies in the first quarter of 2011 rose to threein ten (30%) from 22% in the autumn report and from 27%in the corresponding winter 2009–10 report. By region,redundancy intentions are highest in the Midlands (40%).The number of organisations planning to makeredundancies has risen to its highest level (38%)since the survey began in 2004. More than half (52%)of public sector employers intend to make redundanciesin the first three months of 2011, which include aroundthree-quarters (77%) of local government employers andjust over half of central government departments (52%).More than a third (36%) of NHS employers will also bemaking redundancies during that same period. The numberFigure 6: Redundancy intentions by business sector (% yes)(Base Winter 10–11: overall 759, public 238, private 468, voluntary/not-for-profit 53)60504030Further, almost one in ten (9%) workers will be maderedundant among those organisations that are planningcuts to the workforce, the highest figure since the winter2009–10 report. The reductions are particularly severein the public sector, where around one in eight (13%)employees will be made redundant. Twelve per cent ofthose organisations that are making redundancies in the firstquarter of 2011 intend to make cuts of between 20% Oand50% to their workforce.Public sectorPrivate sectorVoluntary sector20100Winter 08–09Spring 09Summer 09Autumn 09Winter 09–10Spring 10Summer 10Autumn 10Winter 10–118 cipd.co.uk/labourmarketoutlook

LABOUR MARKET OUTLOOKOn average, around three in five (61%) redundancies will becompulsory. However, compulsory redundancies in the publicsector will affect around a third of staff (36%), comparedwith around four in five private sector companies (80%) andvoluntary sector organisations (83%).The average cost of making an employee redundant alsohighlights some interesting differences. The average figurefor the public sector (£29,400) is more than four times thatof the private sector (£7,800). The average cost of makingsomebody redundant in the NHS is £37,300, possiblybecause of the restructuring changes announced by theGovernment and the disproportionate impact this will haveon managers and senior managers. The average cost ofmaking an employee redundant across the whole of theeconomy is just over £13,000 per redundancy, a figure whichfalls to £5,800 for the voluntary sector.Meanwhile, only 4% of private sector companies said thatthey would be looking to employ more staff as a result ofthe Coalition Government’s decision to cut corporation taxduring that same period. Financial, insurance and real estatefirms (7%) and wholesale and retail companies (7%) reportUTthat they will increase employment levels due to the taxchange. By comparison, around one in ten (13%) privatesector companies report that they will be looking to recruitfewer staff as a result of the Government’s decision to raiseVAT from 17.5% to 20% in January 2011. This followsresearch from the Federation of Master Builders, whichreports that the construction industry will lose 11,400 jobsas a direct result of the VAT increase. Meanwhile, the BritishRetail Consortium has claimed that the VAT rise will lead tothe loss of 193,000 jobs in the retail sector by 2014/15.Impact of government policyon employment levelsAlmost three-quarters (73%) of public sector employersand around one in ten (13%) private sector employersreport that they will employ fewer staff as a result of theComprehensive Spending Review (CSR) in the 12 monthsto December 2011. Interestingly, more than a third (38%)of construction companies say that it will have a negativeeffect on employment levels in their organisation. Overall,a third (33%) of employers report that they plan to employfewer staff as a result of the Government’s ComprehensiveSpending Review.Table 1: Proportion of organisations that plan to make redundancies in the first quarter of 2011, (%) by business sectorBase: (Autumn 2010) in brackets Winter 10–11 Autumn 10 % differenceManufacturing and production (108) 34 17 +17Private sector services (392) 31 28 +3Healthcare (58) 38 43 –5Voluntary and not-for-profit sectors (42) 40 35 +5Education (40) 30 43 –13Public administration and defence (119) 63 28 +35Source: Ipsos MORIcipd.co.uk/labourmarketoutlook 9

WINTER 2010–11Migration and offshoringoutlookDespite the overall decline in employment prospects, thenumber of employers that plan to recruit migrants has risento over a fifth (22%) of employers from 17% in the autumnreport. Around two-fifths of education (35%) and healthcareemployers (40%) plan to recruit migrant workers in the firstquarter of 2011. However, this may understate demand,given that LMO projections for recruiting migrant workershave consistently been lower than had been anticipated(Figure 7).The most common roles migrant workers are neededfor include IT professionals (18%), accountants/financeprofessionals (17%) and engineers (16%).OFigure 7: Proportion of organisations that plan to recruit migrant workers in the first quarter of 2011 (% yes)(Base winter 10–11: overall 759, public 238, private 468, voluntary/not-for-profit 53)30252015105Public sectorPrivate sectorVoluntary sectorOverall net0Summer 09Autumn 09Winter 09–10Spring 10Summer 10Autumn 10Winter 10–1110 cipd.co.uk/labourmarketoutlook

LABOUR MARKET OUTLOOKFigure 8: Intentions to recruit migrant workers vs. actual recruitment for that quarter (%)(Base winter 10–11: overall 759)35302520151925211520173217Actual proportion ofemployers that recruitedmigrant workersProportion of employersthat plan to recruitmigrant workers22108570Autumn 09UTPrivate Public VoluntaryWinter 09–10Spring 10Figure 9: Roles that migrant workers are recruited for (%)Summer 10Autumn 10Winter 10–11IT 1821 10 16Accounts/finance 1718 16 6Engineering 1615 24 3Doctor 102 35 8Care worker 73 6 59Nursing 63 11 14Retail manager or assistant 57 – 5Chefs or cooks 54 9 2Sales and marketing 57 – –Biochemist 42 7 5Legal 43 7 2Pharmacist 33 3 –Therapist 2– 9 –Social worker 2– 6 –Teacher 11 5 –Psychologist 1– 6 –Other 48 50 46 32Source: Ipsos MORI Base: (245) All having plans to recruit migrant workers, fieldwork dates: 29 November – 21 December 2010cipd.co.uk/labourmarketoutlook 11

WINTER 2010–11When asked about the contribution non-EU workers maketo their organisations, nearly two-thirds (63%) believe non-EU workers have a positive impact on productivity levels,while 2% believe that the impact is negative. Public sectoremployers are more likely to report productivity improvements(66%) than private sector employers (50%). One in six (17%)employers believe they have been restricted from recruitingas a result of the temporary cap on non-EU migrant workers.Again, the public sector is more likely to say that the caphas had a bigger impact on them than the private sector –in particular, NHS (36%) and education (21%) employers.Equally, a quarter of employers have been prevented fromrecruiting non-EU workers during that same period.Figure 10: Offshoring destinations (%)Fifteen per cent of private sector firms plan to offshore UKjobs to other parts of the world over the next 12 months.Of those planning to offshore UK jobs, the majority (71%)intend to offshore to India, 35% to Europe and 22% toChina. The functions employers most commonly expect tooffshore include IT (39%), call centres (25%), finance (23%),HR (23%) and customer services (23%).India 71 71 89 –China 2223 – –Western Europe 1920 9 –Eastern Europe 1617 – –Middle East 1212 2 20South Africa 76 – 80Asia 66 – –North America 67 – –Rest of Africa 44 – 46South/Central America 11 – –OPrivate Public VoluntarySource: Ipsos MORI Base: (79) All having plans to offshore jobs, fieldwork dates: 29 November – 21 December 201012 cipd.co.uk/labourmarketoutlook

LABOUR MARKET OUTLOOKSkills outlookAround two in five employers (43%) have vacancies thatare hard to fill. Employers have greatest difficulty fillingengineering (23%) and IT (15%) roles. Almost half of publicsector organisations have difficulty filling doctor (46%) andnursing (43%) vacancies.Figure 11: Proportion of hard-to-fill vacancies (%)UTEngineeringITSales and marketingAccounts/financeNursesDoctorsSocial workersPharmacistsCare workersLegalTeachersTherapistsBiochemistsPsychologistsChefs or cooksOther11233344677711152346Source: Ipsos MORI Base: All having vacancies that are hard to fill (326), fieldwork dates: 29 November – 21 December 2010cipd.co.uk/labourmarketoutlook 13

WINTER 2010–11Pay outlookThe expected mean basic pay settlement (excluding bonuses)in the 12 months to December 2011 is 1.3%, a fall of 0.2%compared with the autumn report. Continuing the trendsfrom previous quarters over the past year, the mean pay awardin the private sector is expected to be 2.3%, unchanged fromthe previous quarter. However, pay settlements in the publicsector have fallen further to –0.33%.Figure 12: Average pay awards (mean %) by sector5432O10–1Spring08Summer08Autumn08Winter08–09Spring09Summer09Autumn09Winter09–10Spring10Summer10Autumn10Winter10–11–2–3Public sectorPrivate sectorVoluntary sectorOverall net14 cipd.co.uk/labourmarketoutlook

LABOUR MARKET OUTLOOKResearch methodologyThe online survey went out to a range of CIPD members,and 759 usable returns were received, giving a response rateof 5.1%. Respondents answered a series of questions onemployment issues, from 29 November – 20 December 2010.Data since spring 2009 are weighted on the size oforganisation, sector of the organisation and industry, accordingto the LMO membership profile. Comparisons with quartersprior to spring 2009 should therefore be made with caution.The responses were collated and compiled by Ipsos MORI.To provide more detail, the results were then reanalysed by thesize of the company, sector, region and type of business.The Labour Market Outlook survey is written by GerwynDavies, Public Policy Adviser, CIPD.UTcipd.co.uk/labourmarketoutlook 15

WINTER 2010–11Respondent profile(weighted by sector, industry and organisation size)Respondents by business sector (%)Spring 10 Summer 10 Autumn 10 Winter 10 –11Private 62 62 62 62Public 31 31 31 31Voluntary/not-for-profit 7 7 7 7Respondents by business type (%)Spring 10 Summer 10 Autumn 10 Winter 10 –11MANUFACTURING AND PRODUCTION 14 14 14 14OAgriculture, forestry and fishing * * * 0Manufacturing 9 9 9 9Construction 2 3 2 2Mining and extraction * * * 0Energy and water supply 1 1 1 1EDUCATION 5 5 5 5Primary and secondary schools 1 1 1 1Further and higher education 4 4 4 4HEALTHCARE 8 8 8 8NHS 5 5 5 5Other private healthcare 2 2 2 3VOLUNTARY AND NOT-FOR-PROFITSECTORS6 6 6 6PRIVATE SECTOR SERVICES 52 52 52 52Hotels, catering and leisure 2 2 2 2IT industry 3 3 3 3Transport and communications (includingmedia)4 4 4 4Consultancy services 15 15 15 15Finance, insurance and real estate 9 9 9 9Wholesale and retail trade 7 7 7 7Other business services 12 12 12 12PUBLIC ADMINISTRATION AND DEFENCE 16 16 16 16Public administration – central government 5 5 5 5Public administration – local government,including fire services8 8 8 8Armed forces 1 1 1 1Quango 2 2 2 216 cipd.co.uk/labourmarketoutlook

LABOUR MARKET OUTLOOKRegion/nation to which response relates (%)Spring 10 Summer 10 Autumn 10 Winter 10 –11North 12 13 12 4North-west of England 5 6 5 4North-east of England 2 2 1 2Yorkshire and Humberside 4 5 5 11Midlands 13 12 11 5West Midlands 4 5 5 1East Midlands 4 4 3 5UTEastern England 5 3 3 12South 30 33 34 4London 13 11 11 5South-west of England 6 7 6 2South-east of England 11 16 17 33Scotland 7 6 6 14Wales 3 2 2 6Northern Ireland 2 0 4 13Channel Islands 1 * * 1All of UK 32 33 31 0Not stated n/a n/a n/a 33Respondents by employer size (%)Number of employees Spring 10 Summer 10 Autumn 10 Winter 10 –111–9 15 13 13 1310–49 7 6 6 650–99 6 5 5 5100–249 14 13 13 13250–499 7 5 5 5500–999 10 9 9 91,000–4,999 21 19 19 195,000–9,999 11 10 10 1010,000–19,999 8 7 7 720,000 or more 0 13 13 13cipd.co.uk/labourmarketoutlook 17

Spring 2011CIPD OUTLOOK SERIESThe Labour Market Outlook is part of the CIPD Outlook series, which also includes the EmployeeOutlook and the HR Outlook. Drawing on a range of perspectives (and with the opportunity tocompare data across our regular surveys), this triad of research enables the CIPD to offer uniqueinsight and commentary on workplace issues in the UK.OTHERS IN THE SERIESAUTUMN 2010EMPLOYEEOUTLOOKPART OF THE CIPD OUTLOOK SERIESAUTUMN 2010HROUTLOOKPART OF THE CIPD OUTLOOK SERIESEMPLOYEE OUTLOOKThe Employee Outlook provides a quarterly updateon the attitudes of employees in the UK andthe HR challenges facing employers. It regularlycovers attitudes towards management, work–lifebalance, workload and pressure, communicationand bullying and harassment.cipd.co.uk/employeeoutlookHR OUTLOOKThe HR Outlook provides valuable insight and expertcommentary on the HR profession. It explores thesize and shape of HR functions, comments onthe capabilities of HR professionals and outlinesemerging trends and future prioritiesOcipd.co.uk/hroutlook18 cipd.co.uk/labourmarketoutlook

Chartered Institute of Personnel and Development151 The Broadway London SW19 1JQTel: 020 8612 6200 Fax: 020 8612 6201Email: cipd@cipd.co.uk Website: cipd.co.ukIncorporated by Royal Charter Registered charity no.1079797OIssued: February 2011 Reference: 5447 © Chartered Institute of Personnel and Development 2011