How to prioritise your people strategy amidst soaring employment costs

Anaemic economic growth and a stagnating jobs market were painting a somewhat gloomy picture for UK business even before the announcement of a rise in employers’ national insurance contributions as well as an increase to the minimum wage, both due to come in in April. An overhaul of workers’ rights in the Employment Rights Bill, meanwhile, could cost firms up to £5bn, according to the government’s own impact assessment. 

When employment costs begin to soar, the natural recourse for many businesses is to scale back hiring plans or even reduce their current headcount, and according to our latest employment trends research, 32% of employers plan to hire fewer staff in 2025 as a result of current challenges. But those with ambitious growth agendas for the year ahead won’t be able to execute these without the right talent and skills in place, which begs the question – how do you keep the books balanced and still make sure your all-important people strategy is prioritised?

At a glance: combatting rising employment costs

• Review recruitment processes
• Stay up to date on going rates
• Re-evaluate your benefits
• Audit the skills you have

The question now on the minds of all employers will be how these changes and tax rises can be folded into their existing strategy without forfeiting the productivity and growth that they – and the economy at large – badly need. Here are four tips for organisations looking to offset rising employment costs:

1. Review recruitment processes

This might not seem like the most obvious way of saving money, but looking for ways to make the recruitment process more efficient can save both time and resources, which helps to cut costs. Consider where you could create opportunities for streamlining – could the number of interviews be reduced, for example? If only on a temporary basis?

The importance of precise job descriptions can’t be overstated either. Banal as it might seem, coming to a consensus on an ideal candidate persona, and then using that to craft a succinct and accurate description of the role, is the best way to make sure the right applicants are engaged to start with. Being clear about the job’s responsibilities, skills and experience needed, flexible working policies, and salary range will reduce the chances of engaging or even hiring the wrong person, which can be extremely costly.

2. Stay up to date on going rates

As a major chunk of your recruitment and resourcing spend, it’s vital that salaries are pitched at the right level. If you’re offering a salary that’s too low, the vacancy will take longer to fill, amounting to costs in time and resource. If it’s too high, you’ll be overspending.

But obtaining an accurate and up-to-date picture of the going rates and market averages for a role is time-consuming work, and most organisations won’t have the resources to dedicate to it frequently enough to remain competitive. A salary benchmarking service can give you an accurate and unbiased overview of what your pay and reward strategy should be, enabling you to make informed, real-time decisions about compensation.

Our dedicated research team at Hays delivers precise and up-to-date remuneration data tailored to your organisation, whether it operates in the private, public, or not-for-profit sector. Our service isn't an off-the-shelf product, but a bespoke review based on relevant data sets, adaptable to your organisation's structure, size, scale, and industry nuances.

3. Re-evaluate your benefits

In times of tight profit margins, large salary hikes might simply not be possible, in which case employers will need to consider what else they can do to reward their staff. A one-time bonus could be an opportunity to demonstrate your appreciation for an employee’s loyalty and hard work, for example, even if you can’t commit to a long-term increase. It’s also important to remember that while salary is a vital part of a compensation package, there are other benefits that could help to offset lower pay, such as increased pension contributions or health insurance. Whilst these may still come at a cost, bulk pricing can help to make them more economical.

Aside from monetary benefits, there are other ways of providing your staff with long-term value that won’t directly impact your budget. Offering additional paid leave, providing flexibility on working patterns where possible, and emphasising available opportunities for learning and development are all possible options, and providing a choice allows employees to tailor their benefits to their unique preferences and lifestyles.

4. Audit the skills you have

Finding and engaging the right talent, in the right location, and at the right cost is a riddle that organisations continually struggle to solve. If you’re to tackle the supply-demand gap head on and secure a pipeline of future-ready skills, you’ll need to map talent availability both externally and within your organisation.

The data you have on your current workforce can help you understand what skills you already have in-house, as well as areas you might be overspending on, such as contractors or consultants. Meanwhile, gaining real-time insights into the current labour market – including the availability and location of needed skills, methods for securing them, and awareness of your competition – can help you develop a recruitment strategy that is both targeted and cost-effective. And if this goes beyond your current resources or internal capability, you could consider leveraging on the expertise of a proven talent analytics partner.

Looking for solutions to the complex talent and recruitment issues you need to solve? Get in touch with us today.