In the last year, about 40% of employers issued counteroffers to retain talent lured by more lucrative offers elsewhere, a recent CIPD survey shows. Among 2,000 surveyed employers, a significant number anticipate repeating this strategy to keep staff onboard.
Despite the persistence of over one million UK job vacancies, there’s growing apprehension that spiraling salaries could prolong elevated inflation levels. Among those who made counteroffers, 38% matched the competitor’s salary, while 40% exceeded it.
Companies forecast a 5% wage hike over the next year. The CIPD’s quarterly labor market survey included questions on counteroffers for the first time, signaling an inability to establish historical trends. However, the organisation expects a rise in counteroffer practices as firms focus on talent acquisition and retention.
Job vacancies saw a slight dip to 1,034,000 between April and June but remain 232,000 above pre-Covid figures. Wage growth, despite showing an increase, lags behind inflation. Latest ONS data revealed a 7.3% rise in average pay, but after inflation adjustment, the growth was effectively negative 0.8%.
Both the Bank of England and the government voice concerns that swelling wages and counteroffers could exacerbate inflation, potentially instigating a wage-price spiral. Professor Hilary Ingham noted that private-sector pay deals are hovering around 8%, feeding the inflationary cycle.
To combat inflation, the Bank of England has been tweaking interest rates, consequently raising mortgage costs. Mark Reynolds, CEO of Mace Group, emphasised the current challenge of balancing escalating wages due to mounting mortgage rates.
CIPD’s Jon Boys suggests employers look beyond financial incentives, exploring options like flexible work, extra holidays, and improved pension plans to keep staff engaged. The survey also found that only 20% of employers who made counteroffers had formal policies in place, posing risks related to pay equity and organisational reward structures.
In conclusion, the uptick in counteroffers and wage hikes underscores the UK labor market’s current complexity. Employers may increasingly rely on alternative incentives and formal policies to retain talent, all while keeping an eye on broader economic impacts.
