Home Business News A third of SMEs plan to increase salaries this year, as staff retention becomes a top priority

A third of SMEs plan to increase salaries this year, as staff retention becomes a top priority

by LLB Reporter
19th Jan 24 9:18 am

Businesses are prioritising wage reviews as workers continue to demand pay increases in line with inflation, with a third (33%) planning on increasing salaries and bonuses at the start of this year.

The latest Hiring Trends Index by Totaljobs, which surveyed over 1,000 HR Decision Markers in the UK, revealed that securing another job with higher pay was the leading factor causing staff resignations between October-December 2023 (29%).

While nearly three in five (58%) businesses are confident they will recruit the people they need this quarter, 30% still admit meeting candidate salary expectations will be a challenge.

Retention becomes a top priority

The Hiring Trends Index found that the top workforce priority for businesses in 2024 is improving staff retention and engagement (46%), including reviewing benefits and rewards, assessing training opportunities, investing in innovative technologies and offering flexible working.

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This was followed by training staff to close skills gaps (37%) and improving talent attraction (27%).

However, with businesses facing increasing pressure amidst rising living and property costs (36%), meeting these expectations is proving challenging for businesses. As such, staff retention becomes a top concern heading into 2024 (29%), overtaking filling vacancies for the first time (21%).

One in five (21%) businesses went as far as to admit that they have no plan in place to address these challenges, due to continuing economic and labour market pressures.

Hiring trends (October-December 2023)

Despite news of layoffs across sectors, 78% businesses recruited in Q4 2023, a figure consistent with the same period in 2022. Of those that recruited, 29% increased their hiring down from 36% in Q3 2023, 18% paused and 7% decreased their hiring.

Of those that did recruit, 26% hired roles in operations, 24% in IT and Tech, and 21% in Sales.

Real estate was the sector that increased recruitment the most in this period (46%), followed by construction, medical and health services, and education (39%). This is despite the average time to hire increasing slightly to 6.2 weeks in Q4 2023, up from 6.1 in Q3 2023 and 5.8 weeks the quarter prior.

Amidst a stalling job market, 27% plan to increase their recruitment efforts at the start of this year.

The industries most likely to increase hiring in Q1 2024 are transport and distribution (40%), real estate (36%), medical and health services (36%) and media and marketing (35%). Almost one in five (19%) businesses plan to increase recruitment on specialist roles, with 10% investing more in non-specialist roles.

Over the course of Q4 jobseekers themselves have expressed an increased interest in roles related to employee ‘reward’ and ‘retention’, with candidate searches up 85% on last year. Companies planning to expand their reward and retention efforts in the near future, can expect to find plenty of choice among candidates.

Julius Probst, European Labour Market Economist at Totaljobs said, “Whilst inflation has fallen in the past six months, its effects continue to drive shifts in both wages and the labour market, but it is essential to recognise that money isn’t the sole factor.

“Keeping workers engaged and motivated is equally crucial. Amid broader uncertainty, employees seek roles that offer progression and opportunities for skill development. This not only enhances staff retention but also strengthens a business’s brand proposition, making it easier to hire.

“Businesses must prioritise long-term needs by identifying skills gaps and providing staff with training in cutting-edge solutions like AI. This approach ensures staying ahead in the market and fostering engagement among existing employees.

“Recruitment and retention should go hand in hand, necessitating a review of engagement strategies and benchmarking salaries to achieve successful recruitment objectives this year.”

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