Steve Herbert, Head of Benefits Strategy at Howden Employee Benefits, considers what the points-based immigration system means for UK plc – and reflects on why Human Resources professionals may need to focus on retention ahead of recruitment in the months immediately ahead.
To the best of my knowledge no definitive Human Resources text book on Employee Benefits provision yet exists. But, if it did, I’m pretty sure it would start with something along these lines:
“01:01: Employee Benefits (EB) are sometimes offered by employers to aid recruitment and retention.”
Of course EB provision provides so much more than this, and the industry has spent much time and money ensuring that modern-day offerings also provide tangible and important support in the areas of physical, mental, and fiscal wellbeing, as well as being a major component of successful absence management planning. Yet despite these great improvements many employers continue to see Employee Benefits primarily as a cornerstone of the on-boarding recruitment process, and to a very much lesser extent staff retention too.
But even this rather limited ordering of advantages might be about to change following the government’s announcement of a new “points based” immigration system from 1st January 2021. It is now quite possible – at least in the short term – that retention might become considerably more important than recruitment for UK employers.
The challenge and possible solutions
The immigration points system announcement last week was not, I sense, particularly unexpected by the business community. Yet the solidifying of a minimum salary threshold of £25,600 per annum has sparked a wealth of media commentary and some understandable concerns from UK employers.
Of course the final requirements may well differ significantly from the headline noise of the last few days. And the government has made much of “tradable points”, possible exemptions, and lower salary thresholds for “specific shortage” occupations. Yet in interviews Home Secretary Priti Patel maintained a position of “no more routes for cheap, low-skilled labour” into the UK. And this is the message that will be heard loud and clear by both voters in the UK, and across the potential talent pools of the world.
Why might this be a problem for business?
At other times in the United Kingdom’s recent economic history such a policy might not have been particularly challenging for employers to manage. But in the 2020s – and after half a century of EU membership and decades of free movement of labour – things currently look rather different.
Several factors coincide here:
- Firstly, the UK talent pool has very little headroom at present. Employment levels remain at a record high, and correspondingly unemployment rates at near record lows. It follows that there is not much indigenous talent available to be recruited into low-earning occupations at present.
- The system of state support for the unemployed has long presented a genuine barrier for those seeking employment. This “benefits trap” often results in people being penalised if they seek a return to work via short-term employment or contracts. The problems in this area are legion, and a workable solution to these issues appears just as far away in 2020 as it was in 2010.
- Finally, and certainly not least, in the last few decades the UK has embraced the EU’s Freedom of Movement rules in a big way. This has been particularly the case in low-paying sectors such as hospitality, farming, food production, care, healthcare, and some manual occupations.
As a result of the announced changes far fewer EU citizens may now be able and/or willing to come to the UK, and it’s also possible that many already here will opt to return to their country of origin or the wider EU as a result of the changing status of the United Kingdom. So, when looked at in the round, it seems undeniable that many UK employers will face at least some staffing issues in the months and years immediately ahead. And this may be particularly acute in those industries reliant on low-paid labour.
Low-paid, not low-skilled
Of course the issue is also more complex than just a numbers game.
Cheap labour is often not the same as low-skilled labour. In truth there are very few jobs in 21st Century Britain that don’t require at least some skills, training, monitoring, and on-going development. And some low-paid jobs are only available with the successful completion of prior qualifications and/or candidate screening anyway.
Then there is the time-lag between an employee leaving, and a new joiner arriving. Few organisations can be assured of a seamless change-over in such situations, and any delay in filling recruitment vacancies is potentially damaging to the employer’s productivity and the morale of remaining staff too.
Yet the issues go further still. Even when a vacancy is quickly filled, there remains a learning-curve during which the recruited employee is not working at optimum productivity. Research from Oxford Economics in 2014 suggested that this applies to all new hires, but takes much longer for those who have recently been long-term unemployed or economically inactive.
What are the suggested options available?
To combat the above concerns, the government is encouraging UK employers to rely less on low-paid workers, and instead invest in up-skilling and training workforces. This will certainly help, yet such an approach will come with a significant logistical and monetary cost, and it will take time before better productivity and retention becomes evident too.
Then there is the better use of technology to complete some of the more mundane tasks. Of course this will happen in some job roles anyway, but again comes with a significant time and fiscal investment. So it’s probably unlikely that such changes could be effectively delivered in the few months remaining before the new points-based system is introduced.
And of course there is the option of simply paying both new hires and existing workers more per hour of employment. That would be a big ask for employers at any time, but given the marginal state of the UK’s current economic figures, and the rather worrying uncertainties just over the horizon, is unlikely to be a valid option for many organisations this year.
The “Economically Inactive” talent pool
Another possible solution was suggested by the Home Secretary last week. But Patel’s insistence that employers can aim to attract the 8.5 million “economically inactive” citizens back into the workplace has been widely questioned by many commentators and experts.
The BBC’s reality check team even went as far as to look at the detail of this claim. Their findings (which can be read here) suggest that the numbers available are very much smaller than the government’s headline figures would appear to suggest. And it’s also worth highlighting that even those individuals without tangible barriers to return to work might have valid reasons for not wanting to do so.
Or, what about Retention?
Which takes me right back to the start of this article, and the need to improve employee retention above all else in the months ahead.
Employee retention is just so much easier and cheaper to deliver than new recruitment, and minimises business interruption, training costs, and the loss or productivity. It follows that employers would be well advised to really focus on this important area. So what can Human Resources professionals now do to assist in this area?
As a minimum, employers should look to support their EU workers in achieving settled status in the UK. Howden Employee Benefits & Wellbeing research recently found that many organisations had not been active here, and this should be a priority consideration.
But, regardless of nationality, the key is to ensure that every single worker feels part of the corporate machine, appreciated, and above all well-supported in as many facets of their working and personal lives as possible.
Often the costs of delivering on the above will be minimal. A regular and effective communications strategy will drive home the benefits of working for a company, and will ensure that employees are aware of all the support functions available to them. And revisiting the Employee Benefits offering to ensure that every facet of that works to the advantage of employee and employer alike is certainly recommended as part of this process.
So I would strongly encourage UK employers to think retention before recruitment in the months immediately ahead. Of course recruiting quality candidates remains really important for any organisation, but right now retaining talent – regardless of pay-grade – must be the key focus of the day. And Employee Benefits could and should be a major component of that approach.
Steve Herbert is Head of Benefits Strategy at Howden Employee Benefits