Skills shortage is creating a ‘pay inflation crisis’, claims new research

The legal and finance sectors are being hit hardest by salary inflation with some employers facing demands that are up 37%, claims a 2024 salary guide published by recruitment firm Robert Half.

The guide analyses and reports on market salaries, hiring trends and skills requirements across the UK. It found that 32% of employers say they are experiencing an increase in wage expectation and are having to inflate salaries to maintain a competitive edge for talent.

Retaining talent is proving challenging, too – 26% of companies are offering additional one-off bonuses to keep hold of their staff.

Legal counsel roles with up to two years of post-qualification experience are seeing the biggest rise in salary expectation, up 37.9%. Accounting operations roles came a close second at 36.2%, and chief financial roles followed at 32.4%.

Insufficient salary is the most common reason for rejecting a job offer, with 63% of workers ready to decline a new opportunity if the salary doesn’t suit – meaning many business owners are increasingly having little choice but to meet skilled employees’ demands.

“It is no surprise to see financial incentives are perceived to be a top solution,” says Matt Weston, senior managing director UK & Ireland at Robert Half. “However, continuous pay rises aren’t sustainable and firms need to consider how else they can boost hiring prospects and reduce attrition.”

Weston notes that pay “is not the be-all and end-all” and that a robust corporate culture and a tailored retention programme can be a cost friendly strategy. 

“Our research shows, for example, that almost half (47%) of the workforce would reject a new job if the company didn’t offer flexible working, yet news reports continue to highlight brands that are enforcing office returns,” he says. 

“In many instances, employees leaving a business do so due to deep-rooted talent attrition causes such as heavy workloads and a lack of development opportunities. Business leaders must address all aspects of the employee experience and must do so fast, since an increase in pay is the inevitable by-product of ‘jumping ship’.”

The employer perspective

The guide also analysed the employer outlook for 2024. It found that 69% said they were much more or somewhat more confident about growth prospects for 2024 versus this year, with expanded business opportunities, increased demand and successful restructuring being among the reasons flagged.

When it comes to retaining employees in 2024, 22% of employers said they were very concerned and 53% said they were somewhat concerned. Reasons included talent being headhunted by competitors, high rates of burnout, lack of competitive pay and increased work pressure.

Attracting new talent is a major concern too, with 75% noting it as a worry. 

For 2024, 41% of employers said they are planning a flat-rate salary increase, 27% will give an increase in line with inflation, and 16% will offer performance-based rises.

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Kirstie Pickering - business journalist

Kirstie is a freelance journalist writing in the tech, startup and business spaces for publications including Sifted, TNW, UKTN, The Business Magazine and Maddyness UK. She also works closely with agencies such as CEW Communications to develop content for their startup and scaleup clients.