SMEs Take On More Staff - But Pay Is Still Falling Behind

The latest employment data has revealed the level of joblessness is continuing to fall as Britain's workforce grows - but pay is getting worse.

SMEs and other companies added a net 167,000 people to their payrolls in the three months to June, compared with the first quarter of 2014. This took the size of the UK workforce to 30.6 million, up 820,000 on a year earlier. This figure represented 73 per cent of those aged 16-64.

While the rising population accounted for some of this increase, there was a continued downward trend in unemployment, with the number of people out of work dropping by 167,000 over the quarter and 437,000 over the year to reach 2.08 million, or 6.4 per cent of the workforce.

Notable trends included a rapid fall in youth unemployment, which had been particularly high in the recession and the period that followed, hovering around the million mark. However, this has plunged by around 200,000 in the past year to be just over three-quarters of a million.

Furthermore, the new jobs are increasingly in full-time rather than part-time work. For women the last year has seen part-time employment grow by 132,000, but an extra 223,000 female workers now work full-time. For men the contrast is greater, with 469,000 more in full-time jobs while part-time employment has remained static.

However, the rates of pay companies have been awarding staff have continued to trail behind inflation, with the year-on-year rise of 0.6 per cent (excluding bonuses) the lowest on record.

This appears to contradict the notion that as the labour market tightens, wages would rise due to a scarcity of skills in some areas.

According to the Bank of England. the likely explanation is a low level of productivity, with this improving at a slower rate than it had previously predicted.

The issue was noted in the Bank's Quarterly Inflation Report, which was published this week and predicted that the average rate of pay would only increase by 1.25 per cent over the course of 2014.

Expert Opinion

It is positive to see employment rising across Britain, with such increases perhaps being indicative of the fact that many businesses of all sizes are looking to boost their workforce and staffing levels in order to develop the resources and talent which is at their disposal. <br/> <br/>"While taking on more staff is an incredibly positive sign in any business, it is vital that companies always plan accordingly to ensure that recruitment and the induction of new employees into an organisation runs as smoothly as possible. This is particularly important for small businesses, which may lack the human resources skills that larger organisations possess – meaning they could benefit from seeking legal advice on ensuring they comply with relevant regulations and have policies in place to ensure workers understand their core responsibilities." Fergal Dowling - Partner