Report: Skills gap to spark employee "power shift"

A widening skills gap and radical changes to ways of working have handed newfound leverage to employees in shaping the future of work and employment, experts say.

The restrictions imposed as a result of the pandemic have left a lasting impression on employees, with a recent Deloitte survey finding that almost half of the UK workforce are hoping to work remotely for at least two days a week post-lockdown.

Studies have also highlighted the severity of the UK skills gap. In fact, government data shows that 48 percent of businesses are hiring for roles that require hard data skills, but nearly half of this number have “struggled” to do so.

“The really interesting development has been this power shift in particular towards lower paid, frontline workforces,” says William Gosling, human capital lead at Deloitte.

“We’re going to hit an even more extreme supply crunch of skills that is going to both create real skill shortages for businesses but also bring a significant hike in pay to get people to do those jobs.”

Research by Personio has shown this theory has already become a reality, with 38 percent of employees in the UK & Ireland looking to change roles in the next year. Of that number, the reasons given for leaving include a lack of career opportunities (29 percent), pay cuts (23 percent), poor work-life balance (22 percent) and a lack of learning or development opportunities (17 percent).

RSM people partner Victoria Kirkhope offers similar sentiments to Gosling, arguing that the onus is now on firms to meet the demands of current and prospective employees.

“Firms need to get their heads around what their people want, and reconcile that with still providing effective training, development and coaching,” she says.

“The life-changing impacts of the pandemic have caused a number of people to stop and really evaluate their career and future aspirations. Consequently, employees are being selective about the roles they do and the employer they commit to. It’s up to employers to step up to the plate and demonstrate the opportunities that are available, and how they match individual expectations.”

It is also thought that, with rising inflation and house prices, pay is becoming a more prominent factor in employee satisfaction. Once again, this may prove to influence employers’ approach to acquiring and retaining talent.

“I think the biggest thing at the moment with recruiting and workplace retention is giving employees what they want, and that’s another dimension to this power shift,” says Gosling.

“A balancing act for firms”

There also is an emerging consensus that, in navigating this “power shift”, employers must pay serious consideration to post-pandemic ways of working.

While many have already taken a prescriptive approach to this (Goldman Sachs boss David Solomon mandating a permanent office return for its UK bankers, for instance), Kirkhope argues that the range of needs and personalities among workforces may render this a counterproductive move.

“It’s a big consideration to recognise the impact of the pandemic on the way we work. It will undoubtedly have a lasting impact, and so flexibility will be a big part of engaging talent going forward.

“It’s a balancing act for firms between what people’s preferences are, and then how to make that work effectively. There isn’t any rulebook on this or script to follow, so it will be important for firms to talk to their people as they work through it.”

Despite this, clear divisions in approach have already begun to emerge among key players in certain industries. Investment banking provides a stark example of this, with Goldman Sachs’ hard-line stance being contrasted by competitors such as Deutsche Bank and HSBC, both of whom have moved to more flexible working models.

“The best organisations will see it as an opportunity,” says Nabila Salem, president at digital talent solutions firm Revolent Group. A more progressive approach will hand many firms a competitive edge, she argues.

“This rise of flexible and asynchronous working will be a boon to the best employers as they look to access a new global playing field of talent to help fulfil their company vision.”

Gosling shares this view, noting that the challenge of attracting talent will be eased by offering flexibility to employees.

“We’ve sort of crossed the Rubicon in terms of employee expectations now and going back from that is going to be really hard,” he says.

“All surveys are pointing in the direction of people wanting to work from home much more often than they used to. So, if you’re not offering that, unless you’re throwing a lot of money at people, you’re behind the curve. Those organisations that are prepared to be more flexible are going to have an easier time of it than those following a more traditional path.”

Gosling also places further emphasis on the need for balance, noting that the differing needs and desires of the workforce must sit at the heart of these planning phases.

“You’ve got generational and hierarchical tension to contend with. Generally, the top-level leaders and those in the earlier stages of their careers are seeking a return to the office. But with this new death of distance, you’ve also got people saying: ‘I don’t need to be close to an office anymore’.”

However, an increasingly prevalent concern for businesses is how these new models will work in practice, particularly in terms of alignment with day-to-day processes. Though remote working has largely been successful for many organisations throughout the pandemic, questions are being asked about how teams can be effectively managed and encouraged to remain engaged in a hybrid system.

For Gerwyn Davis, labour market adviser at the Chartered Institute of Personnel and Development (CIPD), this comes down to people management ability – an area that he says requires significant investment throughout this period of employment challenges.

“Investment in people management skills will be more valued than ever. Ultimately it should be about choice, but the big risk is ensuring that it’s equitable, so again this comes down to the management skill to ensure that doesn’t happen.”

Kirkhope offers a similar view, arguing that a critical period is on the horizon for HR.

“There’s a growing to-do list for HR departments, and a need to make sure that people managers have the tools and confidence to be able to manage people remotely and in-person moving forward,” she says.

“They also need to be equipped to have those career conversations with people, so there’s a lot to do in terms of making sure that leadership are well-equipped to support new ways of working.”

But beyond this, there is a growing realisation that organisations must invest heavily in upskilling the workforce as a means of offsetting the UK’s burgeoning skills gap.

This is reflected in Deloitte’s 2021 Human Capital Trends survey, with 41 percent of executives citing “building workforce capacity through upskilling, reskilling and mobility” as their number-one initiative for navigating future disruption.

Skills shortage

What Gosling refers to as a “supply crunch of skills” can be attributed to a series of key factors. Arguably, the residual effect of Brexit is the most significant, with data from the Office of National Statistics indicating that the EU migrant exodus currently amounts to around 900,000 people.

Davis highlights this as a crucial consideration, stressing that, while recruitment data in certain sectors looks “rosy”, much of this is merely “replacement demand” due to those sectors having been ruptured so severely by the exodus.

“While it appears buoyant on the surface, there are still some significant challenges. Whereas a lot of people are seeing that this amounts to a recovery, I think that because the stock of EU nationals has fallen as heavily as it has, a lot of this is merely replacement demand.”

Davis supports his view by pointing to vacancy data from June, which depicts major spikes across sectors such as hospitality, transport and logistics – industries known to have traditionally hired the most concentrated levels of EU nationals.

“The ending of free movement should have acted as a catalyst for a lot of organisations, especially those who have relied on EU migrant labour, to put in place workforce planning strategies and review all of their recruitment policies alongside their approach to skills investment and pay.”

A similar trend can be pinpointed in terms of post-pandemic recruitment catch-up, Davis argues, with countless firms now reversing pay and hiring freezes. In theory, this will also be partly responsible for an uptick in employment figures.

Davis also points to dwindling qualification levels among young people in the UK as a contributing factor to the “supply crunch”. Government data shows that, in Q4 2020, 11.6 percent of all young people (aged 16 to 24) in the UK were not in education, employment or training (NEET). This figure represents the highest quarterly uptick since 2011.

Contrasting this with a surge in professional occupation employment in the past two years, Davis argues that this paints a worrying picture of the UK’s skill pipeline.

“People qualified to relatively high skill levels are required, and yet we have a long tail of young workers who don’t even have level three qualifications.

“We’re going to have a big issue in terms of this rise in demand for high skilled jobs and shrinking labour supply.”

Kirkhope largely mirrors this view, citing “supply and demand in terms of recruitment” as the biggest challenge in UK employment at the present time.

“We’ve seen a really sharp rise in the number of vacancies, coupled with an equally sharp decline in candidate availability.”

Employers have become increasingly familiar with this issue in recent years, evidenced in particular by data from The Charted Institute of Management Accountants (CIMA). A report published by the watchdog showed that the pandemic had highlighted skills gaps for two thirds (65 percent) of organisations.

The report also showed that, of those organisations, nearly all (93 percent) believe that these skills gaps are significant enough to negatively impact organisational success.

“Skilled workers are really needed right now to help navigate a fast-changing environment and to help determine the most effective future strategies for clients. Therefore, those are the types of skills that are really in demand at the moment,” says Kirkhope.