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Reprieve for public sector recruitment?

Mark Beatson, chief economist at the CIPD, talks to PSE about the organisation’s latest Labour Market Outlook and what it could mean for the public sector.

While the number of people employed in the public sector looks set to continue falling, the scale of the fall is considerably less than in recent years, according to the CIPD’s (Chartered Institute of Personnel
and Development’s) latest Labour Market Outlook (LMO).

In fact, the net employment balance for the public sector is at its ‘least negative’ since the CIPD’s autumn 2009 report. The rise is largely due to an increase in recruitment intentions, which have risen to their highest level for almost two years.

The LMO found that public sector employers are more optimistic than in the winter 2013-14 report, with 72% planning to recruit in the second quarter of 2014, up from 59% in the previous report. This is the highest figure recorded since winter 2012-13 (74%).

Recruitment optimism

Mark Beatson, chief economist at CIPD, told PSE: “The recent trend has been that public sector organisations have been getting a little less pessimistic – in the sense that the proportion expecting to make redundancies has eased down a bit, and the proportion expecting to do some recruitment is edging up.

“I don’t think we should assume, though, that this means the public sector is going to start growing again in terms of size. If you look at the recent trends, and the likely pressures on future finances, then quite clearly the public sector – in terms of total number of employees – is going to continue shrinking for quite some time to come.

“What this data is telling us is, perhaps, that some public sector organisations have been through quite a lot of restructuring and have made quite a few redundancies in order to adjust their staffing to complement new budgets and business models. So you might see a bit of a pause there.”

The LMO report revealed that recruitment intentions are strongest in education (77%), human health and social work activities (72%), financial, insurance activities and real estate (70%) and the information and communication (70%) sectors.

“Our survey highlights that areas where there may be some movement is in highly-skilled areas like education and health where overall employment numbers have held up much better across the public sector as a whole,” said Beatson. “Also, some organisations are aware that they need to keep the talent pipeline managed and if you have a complete recruitment freeze for five years, suddenly you find you have nobody to develop or bring through the ranks.”

What is slightly ironic, though, is that the CIPD report revealed that more public sector employers (52%) are currently having difficulties filling high-skilled vacancies than private sector (37%) or voluntary sector employers.

Also – consistent with recent LMO reports – the proportion of organisations expecting to make redundancies remains lower in the private sector (22%) than in the public sector (33%).

Beatson added that “clearly, many public sector organisations will be anticipating further cutbacks in the future, which makes it harder to put plans in place to recruit”.

As in previous LMO reports, redundancy intentions for the second quarter of 2014
are most prevalent among public administration and defence employers (51%) in the public sector. In the private sector,
over a third (37%) of finance, insurance and real estate organisations and a quarter (26%) of those in the wholesale, retail and motor trades are planning redundancies in the next three months.

Pay restraint

Overall, about seven in 10 (69%) LMO employers employ individuals on temporary contracts, with this more prevalent among public sector employers (83%) than private sector (65%). 

The LMO results, which are based on responses from 1,026 HR professionals and employers, however, may reflect the challenges many public sector employers currently face in attracting candidates against the background of pay restraint and public spending cuts.

As the report shows, around four in 10 employers in the private sector report that they will offer higher salaries to attract new talent to the organisation, which compares with just one in 10 public sector employers. It also warns that the challenges facing public sector employers, especially those in healthcare, may become more acute in the next parliament.

Beatson said: “In comparison to a private sector firm, public sector employers have less control over the money side of things and also about how skills recruitment and support is given – so it is a difficult challenge.”

Asked what the main challenges are in recruitment, Beatson said: “Pay is more of an issue than job security on its own, especially for the high-skilled workers. Pay and access to pensions and key benefits like that is quite likely where [the public sector] suffers in terms of competition from the private sector. The area where they will find it increasingly difficult will be managing pay systems in
ways that allow them to compete for good people in competition with private markets or overseas companies.

“But if they can’t compete on pay, what can they offer instead that can still attract employees? It may come down to playing to people’s vocational commitments and public service values, because that is what the private sector would find it hardest to replicate.”

The CIPD added that, overall, the report found little evidence that the buoyant jobs market is feeding through into recruitment difficulties for the majority of employers in the short term, but some sectors are struggling to fill high-skilled vacancies. The CIPD is therefore urging employers in all sectors to start planning ahead to mitigate the risk of widespread skills shortages in the longer term.

Training

What was revealed in the study is that public sector employers are the most likely to offer training schemes to young people (82%), with the private and voluntary sectors less likely (75% each).

Apprenticeships are the most popular training scheme offered to young people in all sectors, although work experience schemes are equally as popular in the voluntary sector. LMO employers working in public administration and defence (62%) and manufacturing and production (47%) are also most likely to offer Apprenticeships.

Against the backdrop of funding cuts, recruitment freezes and redundancies, PSE asked whether the public sector could really “invest in their workforce now to offset future skills shortages” as the CIPD has suggested.

“Yes,” said Beatson. “But employers are going to have to be much more flexible and imaginative in how they use resources.

“We know from various surveys that training budgets often get cut during difficult financial times. So, wherever employers are making investments they will have to be very carefully designed and targeted at key people and finding ways that maximise value for money.

“The public sector will also have to be a little more selective. In the past, everyone used to get sent on courses – and those sorts of things become very expensive. So smart opportunities to develop people that don’t involve expenditure, such as internal secondments, and ways in which they can provide employee development, may be the way forward. It is about finding things the private sector may find difficult to replicate.

“If you look at medics, for example, there may be a private sector provider supplying hip replacements – so people go do these because they might get better money – but there are some people who would prefer a greater variety of clinical practice, and that means you have to work in the NHS.  With regards to recruitment and training going forward,  it is all about thinking about what the public sector can offer that can’t be offered anywhere else and trying not to go through the most costly methods; but by investing more time and effort rather than money into development.”

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