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Unemployment Down – A Good or Bad Thing for Employers?

This week the Government announced that UK unemployment had fallen by another 125,000 (its 15th consecutive monthly drop now taking UK employment above 30 million and female employment to 14 million),and that in the year to December average earnings had increased by 1.1%. Coupled with inflation dropping below 2%, this is an optimistic start to 2014.

There are still dangers. While this increase is encouraging, a significant element of the rise is in part time work so earnings capability still has some way to go. Many companies that have taken on new workers will still be cautious about such investment, and will be gradually deciding whether their projects were actually worth it. Youth unemployment has fallen, but is still worryingly high – 900,000 with over 250,000 of them unemployed for more than a year.

The Office for National Statistics also warned that the employment increase is slowing, and the CIPD has expressed concerns that a ‘productivity hangover’ has led to a drop in recruitment and a short-term difficulty in motivating staff. That said, some people even see this as good news. Howard Archer, chief UK economist at IHS Global Insight, has been quoted as saying that "It could be an early sign that productivity is finally starting to pick up with more companies making increasing use of their existing workers rather than taking on new workers.” If so, this is not only good for longer-term growth, but it has also probably helped to bring more people from part-time hours onto full-time (the number of part-timers fell by 29,000 over the last quarter). Work still needs to be done, but let us not forget that these are encouraging signs after only a few years of rescue and recovery in a world that suffered as badly – sometimes worse.

One particular trend and potential area of concern is the number of self-employed ‘workers’, who make up the figures (a record high of 4.37 million). The status of self-employed worker can sometimes be ambiguous from an employment point of view. Many ‘SEWs’ are just workers who call themselves self-employed, but are in reality casual workers, although each case will turn on its own particular facts; for example, we learned recently from the Quashie case that lap dancers may very well be self-employed!

Most of us can probably think of one or two people who have recently gone genuinely self-employed. This is fine in itself, however the life of a self-employed consultant (or similar) is rarely easy. Many became self-employed because they had to, rather than because they genuinely wanted to. This in turn may make it more difficult for them to get a job with a firm when more become available, as companies are often suspicious of independently-minded employees and their true success record.

This is a problem to watch, and civil servants and politicians may want to consider the impact of a labour market flooded with mediocre self-employed workers of one kind or another and measure the true success of their pro-business policies accordingly. The good news is the vast majority have some years of experience (I’m always saying that a few grey hairs is a good thing from a consultant’s point of view; as they breed confidence!).

What are the implications to employers of all this? When employment is more stable employees will consider moving on. This is a common response when an economy comes out of a difficult period and we’re seeing distinct signs of itchy feet amongst many employees. Expectations have changed in recent years. As well as stability and decent remuneration, employees are typically looking greater flexibility in their working life and recognition for what they do well.

In an age of recovery, we need the best people to drive forward the business. Having the best team in place now becomes more important than ever before. If we already have great people on our team we have to look after them to ensure they stay. If we’re looking for excellent new recruits we have to consider their motivations as well as our own when we go out to the job market and ensure we have a process in place to attract and retain the best talent.

Russell HR Consulting provides expert knowledge in HR solutions, employment law training and HR tools and resources to businesses across the UK.

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