Press Release

Earning power falters, adding to record recruitment problems

25 June 2007 – Organisations across the UK are struggling to attract staff as movements in earnings drop for the first time in 4 years and bonuses become less frequent.  A survey of 42,205 individuals by the Chartered Management Institute and Remuneration Economics also shows that resignation levels are up, despite employers offering a variety of incentives, as they try to hang on to the best talent.

The 2007 National Management Salary Survey shows an average increase in earnings of 5.3 per cent, down from 5.7 per cent in 2006.  Representing employees from trainee level to chief executive, this figure is also the lowest movement in earnings since 1996.   At 2.6 per cent the smallest pay rise was awarded to employees in the transport and logistics sector.  Top of the ‘industry earnings league table’, for the 12 months to January 2007, is the HR sector (5.9 per cent).

In real terms, the findings show average total earnings, for managers, of £47,449 across the UK.  Managers in Scotland enjoyed the highest increase (8 per cent), but at £47,902 they are only the third highest earners.  The top earning managers are London-based (£54,808) and their take home pay represents a 29.9 per cent difference against the lowest paid managers in Northern Ireland (£38,399).

It is also clear that bonus payments are playing less of a role in overall ‘take home pay’.  In 2007 59.2 per cent of executives were awarded bonuses, representing a drop for the second consecutive year.  The findings go on to reveal an average bonus payment across the UK of £5,543 for managers, but shows vast regional differences.  Employees in the South East, for example, were awarded £3,171 on top of their annual salary compared to £5,382 in Scotland and £8,887 in London.

The survey, now in its 34th year, also reveals that 81 per cent of employers are reporting recruitment problems - a fourfold increase since 2002.   In a sign that employers are becoming increasingly desperate to find the right calibre staff, 32.6 per cent now offer ‘golden hellos’, compared to just 16.3 per cent in 2006.  82 per cent also indicate that they will make ‘referral payments’ to staff, up from 62.5 per cent, last year.

Asked why they are experiencing difficulties recruiting staff, the majority of employers (73.2 per cent) blamed a lack of qualified candidates.  Competition from other organisations ranked highly (68.4 per cent), but employers also admit that they have failed to learn lessons from recent years.   51 per cent said they offered little in the way of training or career development, a figure that has risen from 37 per cent, last year.  More than 1 in 4 (27 per cent) also said restructuring had caused job insecurity (up from 20 per cent).

The survey also reveals that resignations have increased; now standing at 7 per cent compared to 4.6 per cent, last year.  These findings point to a return of the mid 1990s trend, with resignation rates higher amongst managers (4.6 per cent), than directors (3.5 per cent).  In regional terms, employers in the North West are worst affected, with 8.5 per cent of staff resigning in the twelve months to January 2007.

Jo Causon, director, marketing and corporate affairs at the Chartered Management Institute, says: “The steep climb in organisations reporting recruitment difficulties, mixed with an increasing number of resignations should be ringing alarm bells for employers.  The marketplace is clearly tipping in favour of the employee, so if they are serious about retaining the best talent organisations urgently need to meet the needs and expectations of their staff.”

Looking at wider benefits, the proportion of organisations providing a ‘complete remuneration package’ continues to climb.  For example, childcare voucher provision is up to 70 per cent (from 67 per cent, last year) and life assurance is offered by 57 per cent of employers (up from 52 per cent).  Protecting the environment is clearly climbing the organisational agenda as company car provision is declining and more organisations (70 per cent) encourage use of public transport through season ticket loans, compared to this time, last year (67 per cent).

Paul Campfield, director at Remuneration Economics says: “This year’s survey shows how benefits packages are increasingly being offered to employees amongst all levels of seniority.  When reporting first began, in 1974, provision of medical insurance was largely the domain of directors.  Today, over 70 per cent offer the same benefit to staff across the organisation.”