The Battle of the Recruiters: the 2021 Skills Shortage Explained

Struggling to recruit? Experiencing the squeeze of the skills shortage? You aren’t the only one – in fact, the whole of the UK is struggling to recruit right now, and the issue is leading to all kinds of shortages, logistical challenges, and business aim nightmares. But what’s going on?

The Goods Shortage and Recruitment

The UK is facing many shortages of goods at the moment. Whilst the keen among you might argue there isn’t a shortage, but a logistics issue, we would argue that for the day-to-day end consumer, not having food or fuel in places it’s needed is a shortage – people can’t get food and fuel because there isn’t enough at the point of sale – it just doesn’t look like one to suppliers when the issue is logistics. They might have the opposite problem, where they can’t move stock away and it’s piling up! In fact, this shortage mirrors the flour shortage from the start of the 2020 pandemic, when the issue was once again a logistical one.

In a statement on the 2020 flour shortage, UK flour millers – the trade association involved in the production of wheat flour – explained that it used a system called just-in-time, where no more than 5 days of surplus were kept at any one time, and at the retail end of the line, there was no surplus at all. The just-in-time supply chain was designed and developed by Toyota, who was having an issue competing with the new faster, automated supply lines in America because of their surplus stock and the cost of producing a product not capable of being sold.

Traditional logistical systems before JIT operated on a push basis. In the instance of a bread-making pipeline, a farmer would harvest a field of wheat and store it until the mill needed grain to turn into flour. Each stage would end in a large surplus which would have to wait until it could be pushed towards the next step in the process, right through until a customer buys a loaf.

JIT operates in the opposite fashion. A flour mill will not keep a surplus of flour. Instead, when a baker wants to buy a bag of flour, only then will they purchase grain and mill it into flour. It works by pulling from the previous step in the process. A step will not be carried out until it has the resources to do so, and when it does, very little surplus is kept. This is more efficient where costs, transport and storage are concerned, because you don’t need to store large amounts of surplus and materials – they arrive just in time. And in the case of food, it reduces waste because food is (ideally) only being produced as fast as it’s needed.

Naturally, this isn’t exactly how things work – it’s a lot more complicated, with cold storage facilities helping to provide seasonal food year round. However, those storage facilities are (according to the CBI, the Confederation of British Industry) at their lowest stock since 1983 when the CBI started surveying. But whether a tomato be on the vine or locked in cold storage until it can be made into spaghetti sauce, the problems the UK is facing right now still exist – according to the head of the Co-op, these shortages are the worst he’s ever seen.

A weakness in the just in time system is its sensitivity towards disruption, which was the cause of the 2020 flour shortage, and the cause of shortages now. Since the supply chain is pulled – orders are made when they’re needed and not before – any inability to fill that order can cause massive disruption. This is why we describe the current crisis as a shortage – for the places that need it, they can’t get it. And since they can’t get it, to an every day consumer, there is a shortage. And according to the Road Haulage Association, this could be the state of things for the next eighteen months.

But why are we even talking about the inability to get food into stores and fuels into pumps in the first place?

Let’s talk about recruitment.

Recruitment and HGV Drivers

There is currently a shortfall of about 100,000 HGV drivers on the roads. The most obvious two reasons you might come up with might be COVID and Brexit, so let’s tackle those before we move on.

It might be tempting to blame COVID for the food shortages. After all, like we previously mentioned, the flour shortages in 2020 were caused by COVID. The difference is, however, that this is a national problem, not international. The only issues with supply outside of the UK have been in British sections – take this tweet from Daniel Emery, a reporter from the BBC and MSN, pointing out the only thing French people couldn’t get hold of was British food (except for two lone bottles of Lea and Perrins; thank God for that). Other countries simply aren’t suffering the same shortages as the UK – which means it’s something unique to the UK.

Brexit does have more of a part to play. The Leave Campaign promised that it would be able to negotiate a trade deal with the European Union which would involve the “continuation of tariff-free trade with minimal bureaucracy”. This simply has not panned out, because it is fundamentally at odds with what the European Union stood to achieve, and what we’ve lost by leaving it.

The European Customs Union harmonises tariffs, which is why those in the custom union can enjoy tariff-free trade – the European Single Market, on the other hand, harmonised regulations, which cut back on bureaucracy. Those not part of the Single Market or Customs Union had to provide import/export declarations, safety and security documentation, identity checks, physical checks, and so forth. The reason countries join the EU is to avoid these issues – now we have left, we must once again contend with them. And this is time-consuming, and costly, and lead to hour-long delays in Dover and Calais on top of already long driving shifts.

We’ll get onto why the longer shifts are an issue in a moment, and this is just part of the problem. The other is that the UK has been very reliant on Eastern European labour, especially HGV drivers, who came here as part of the European free movement agreement, and returned home following Brexit. The British government has been offering 5,000 temporary visas to make up the shortfall – the problem is those visas are wildly unpopular, with only 27 people taking the government up on the offer. Many people have criticised the government’s visa program, calling it hostile and unwelcoming, as it then forces Europeans back out on Christmas Eve.

Why, say critics, would someone take up a visa with such abysmal terms when the UK has been so hostile to them to begin with?

Worse, this is only part of the problem. The loss of drivers due to Brexit only makes up 25% of the shortfall. So why does the UK have such a shortage of drivers? The truth is, many people in the UK have licenses, and are choosing not to drive. Why? Because they don’t like the working conditions and the pay. In an article she wrote for iNews, truck driver Becky Gibson wrote that many facilities for drivers are so foul she “wouldn’t even let [her] dog use” them.

Meanwhile, Essex driver Tim Baldwin says that he’s lucky if he gets five hours of sleep a night, with a typical day starting at one or two am and lasting for up to fifteen hours. The pay is not appealing, the job is hard, and it’s frequently disgusting, with Tim describing having to use carrier bags or bottles to relieve himself and showers where he found loose, used condoms on the floor. This does not pair well with the fact that nearly a quarter of workers have been rethinking their careers in the wake of the pandemic – after getting more time to spend with their families and more rest, many drivers have decided they’d rather find jobs with better hours and conditions.

This single sector is a microcosm of the larger recruitment issues facing the UK today.

Skills Shortage

There are more vacancies for skilled candidates than there are candidates. This is the basic truth of Britain right now post-pandemic.

And what’s unusual about that is it wasn’t the employment crisis that we were expecting – or bracing ourselves for, even though a serious skills shortage on the horizon was noted by the Open University back in 2018, when it pointed out an eye-watering collective £63 billion bill paid by businesses due to the shortage. But, unfortunately, that’s not the recruitment issue the UK has been focused on. Bracing itself for an unemployment high of nearly 10% from isolating due to the pandemic, the government hired and trained nearly 13,500 work coaches to get people relying on Universal Credit or other benefits back into work.

This meant that the great unemployment spike didn’t happen – though the problem still persists, with a quarter of a million people still unemployed. The crisis now is not in the workforce – it’s on the side of the hiring managers, recruiters, and companies trying desperately to fill roles and being unable to find anyone suitable for those roles.

So if there’s people looking for work, and vacancies need filling, what’s the problem? This is not a crisis of skill shortage – it’s a crisis of skill mismatch. The people looking for work don’t have the skills that the job market needs to fill. Worse, they are often the types of jobs that freshly trained people can’t step into – they’re senior positions requiring years of experience. Older, more experienced people have been more vulnerable to COVID – and the majority of deaths have hit people over 45 years old. So COVID has created a gap in the workplace for more experienced workers, and you can’t fill that gap with a six months reskill course.

Brexit has also made the problem worse. Many professions, like healthcare, have relied heavily on immigrants. But the points system introduced by the Conservative government puts moving to the UK and working here out of reach of the kinds of skills we need the most, such as in the construction industry.

Back to Tim Baldwin above; he pointed out in his interview that, whilst some in the industry might be willing to offer bonuses to people willing to be trained, on the whole, the industry needs experienced drivers who have plenty of experience hauling long distance. At the end of the day, you don’t necessarily want some 18-year-old kid driving. You want someone whose older, has got experience on the roads – not someone who has just done their car license last week and now is doing a Class 1.”

That kind of experience just isn’t available, and it’s not a gap a simple reskilling program is going to fix in the short-term. And Tony Wilson, director of the Institute for Employment Studies, worries that the government will be too quick to dump many of the work coaches they picked up, which will only exacerbate the issue. In an article for the New York Post, he said; “My worry is the government will say: ‘This is job done. We don’t need those work coaches any more. Let’s let them go before they become too expensive. But actually we are going to need specialist employment services. We are going to need investment in occupational health, child care and so on.”

This has also created a situation where those new hires are more difficult to find, have higher standards, and are much more expensive – a simple problem of supply and demand. Where an employer has lots of potential hires who are fighting in a highly competitive market, they can negotiate down salaries. When the issue is the other way around – when entire industries are crying out for people with skills, experience, or just enough gumption and flexibility that they’ll reskill – that puts the power in the hands of employees to negotiate higher salaries. Add to that the cost of extended recruitment drives – and it’s making every new hire eye-wateringly more expensive.

Not that the increase of expected pay is necessarily a bad thing for the economy as a whole. One reason for the massive skills shortage is that the pandemic has given people perspective on what’s important to them, and they are, on the whole, less likely to take jobs for lower pay that lack other benefits like good working conditions.

The Prime Minister himself, in an interview with Andrew Marr, has pointed out that after ten years of flatlining, we are only just beginning to see a genuine rise in wages that doesn’t simply keep pace with inflation. And higher wages with more benefits are correlated to higher productivity, which has stagnated over the past ten years – so despite the pains now, we might see a jump in productivity in line with the new higher wages. Not only that, higher wages also correlate to more economic activity, which will stimulate the economy.

But even with that thin silver lining on the very dark cloud, there are even more issues to tackle.

IR-35

IR-35, also known as the off-payroll working rules, are designed to close tax loopholes where employers could avoid paying tax on their employees, whilst employees could enjoy paying tax as a self-employed person – including enjoying things like tax refunds for business expenses, and the like.

IR-35 is the central point of the Kaye Adams and Lorraine Kelly employment cases, where they argued they aren’t actually employed by their networks, but self-employed. Kelly won on the argument that she did work beyond the Lorraine show and was not bound to the same contractual terms as Christa Ackroyd, who failed to make her argument on the basis that the BBC did in fact have more contractual control over her and she acted more like an employee.

IR-35 is therefore a test; does the contractor act like an employee, or a self-employed person? If they act as employees, they are ‘inside IR-35’, and if not, they are ‘outside IR-35’, and rules about how they must be treated (such as how they pay tax) depend on that definition. You might hear this test referred to the Check Employment Status for Tax (CEST) tool.

Let’s go over the CEST tool and its concerns right now.

Supervision, Direction, and Control.

For someone to be self-employed, they should have control over their own activities and timetable. If your contract states specific times you start and finish work, or the days you’re required to work, you’re more like an employee. This is also true if your client oversees your work excessively and does not allow you to complete the work however you’d please, or you’re working on multiple different tasks as your client sees fit, this all suggests you fall inside IR-35.

Substitution

Can you send someone else to complete the work? Then congratulations; you probably fall outside of IR-35. If your client wants you, specifically, to carry out the work, you are an employee. If your client wants your services more broadly and you can send someone else to complete the work in your stead, then you’re more likely to be a genuine contractor.

Mutuality of Obligation (MOO)

This is a clause in employment contracts where an employer is obligated to offer work, and you as an employee are obligated to take it. You might consider zero-hour contracts, where that obligation does not exist, but someone on a zero-hour contract fulfils other qualification like supervision. This is why IR-35 is so tricky – it isn’t hard and fast.

Another way to consider it is this; are you taken on for a single project, or do you have other tasks after that? If you’re working on a single project and then leaving afterwards, you are a contractor. If not, you are an employee.

Do you supply your own equipment? Where is the financial risk (are you taking the financial hit for errors)? Are you paid on a project by project basis? Are you free to work for multiple companies or clients? Do you do business on your own account? These are all extra hints that you are a contractor, not an employee.

Impact of IR-35

So, why discuss this? Because the changes to IR-35 mean that the responsibility for assessing IR-35 has shifted to the client – and that’s been making some roles harder to recruit for. For recruitment agencies, there was a real fear that they were responsible for identifying the IR-35 status of employees. The lack of guidance has also made it so some clients are refusing to use recruiters and staffing companies at all.

For instance, 8 out of 10 firms are struggling to hire IT contractors, says Hays Technology, a recruitment agency supplying skilled IT contractors. Most contractors want to stay outside of IR-35 – but the new rules mean that companies are more likely to say they are inside IR-35 and must be payrolled, which is creating a massive gap where skill is needed, but that skill no longer wants to work on those terms. The result is that 42% of companies relying on contracted IT skills say they can’t achieve their business objectives because of IR-35.

We in HR and You have been dealing with clients with similar concerns, that the rules of IR-35 will prevent them from being able to fill talent gaps in their companies and that they will be liable if genuine mistakes are made. This is a massive problem with no apparent real solutions.

The Path to Recovery

In short, a pile-up of issues have affected the recruitment process up and down the country. Brexit, COVID, the general skills shortage, IR-35 – all of these issues have cumulated in a perfect storm where there are too many vacancies and not enough of the right skills to fill them. Suren Thiru, the British Chamber of Commerce’s head of Economics, commented that one weak point in the coming months would be investment. “It is concerning that business investment  looks like being the weak point of the recovery because it undermines the UK’s ability to raise productivity and increase our long-term growth prospects.”

However, investment struggling is hardly the whole story. We wish we could lay out a quick, simple path to recovery, but the truth is that every firm is different and facing their own unique storm of challenges between the skills gap, IR-35, Brexit and COVID recovery.

One client cannot find drivers with enough skill and experience to deal with the demands of the jobs they need to fill – another client feels like IR-35 is making recruitment feel like trying to get blood from a stone. A single strategy can’t guide us out of the storm – but with adequate support, we believe that the country can recover from the crisis.

What do you think?

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Here to Help

Recruitment, training, and managing your workforce to be the best it can be is all part of our work here at HR and You. If you’re struggling with the recruitment gap and a skills shortage in your recruitment process, feel free to give us a call. We can help guide you through the recruitment process and bring out the absolute best in your people, for you – and keep those new people with you for years to come.

We are here to provide full advice, support, and guidance. We can advise in any HR or Employment Law matter: you can contact a member of our team on 0333 006 9489 or [email protected]

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