UK employers pay premium to get office workers back

Decline in the size of the UK’s workforce, down 600,000 sine the pandemic, means those people who are applying for jobs can ask for more flexibility and benefits.

Wages are rising at near-record rates because workers are in short supply, even though the economy is headed into recession.

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 UK's biggest recruitment firm has said.

James Reed, chairman of recruitment giant Reed, said employers are having to lift wages most in industries such as hospitality, manufacturing and healthcare where there is 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,” Mr Reed 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 UK 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 NHS, hospitality and catering, where wages have historically lagged other sectors and workers cannot do their job remotely.

While overall pay in the UK is up 6.8% year-on-year across job postings on Reed’s website, it has jumped almost 13% 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 those people who are applying for jobs can ask for more flexibility and benefits. 

That is tilting power in the economy away from capital and toward labour for the first time in decades. 

Wages have risen rapidly, hitting 7.2% in the private sector in the three months to November when excluding bonuses. Apart from the period of 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 Bank. 

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

• Bloomberg