Out-Law News 3 min. read

Manufacturers can take steps to retain talent, says expert, as industry report highlights skills concerns


Manufacturers can take some steps to recruit and retain talent amidst a competitive market in which there is a shortage of skills, an expert has said.

A new report by manufacturing industry body EEF has highlighted that many manufacturers have encountered problems in recruiting suitably skilled and qualified workers and expect the challenge to persist in the coming years.

Neil Black of Pinsent Masons, the law firm behind Out-Law.com, who specialises in employment law within the manufacturing sector, said that the EEF's report was the latest to highlight a skills problem within the industry.

Black pointed to a Society of Motor Manufacturers & Traders (SMMT) study in February that highlighted that nearly 20% of the 5,000 unfilled vacancies in the UK automotive market are considered to be critical roles by the recruiting employer. He said that the skills shortage is a "common issue" affecting other sub-sectors of manufacturing too, from food and drink to aerospace and life sciences, with talent often "sucked up the supply chain" and causing operational issues for all companies in that supply chain, including the ones at the top.

Black said, though, that there are measures manufacturers can take to help them retain talent. He recommended a "multi-layered approach", from supporting agile working, apprenticeships and graduate schemes, to restructuring remuneration models and using restrictive covenants.

"Manufacturers should look at things like how they structure bonuses and elements of performance-related pay so that rather than just rewarding workers one year and allowing people to then leave once that bonus hits, they instead aggregate rewards over a period of time, like a couple of years, and overlap them in different schemes so there is a constant locking element that makes it expensive for people to leave and in turn encourages them to stay," Black said.

"Restrictive covenants, if deployed correctly, can also be very useful tools. They serve to protect against what staff can do immediately after they leave. Repayment provisions relating to training costs can also, given that manufacturers invest heavily in their staff, help companies recoup costs they incurred in supporting leavers' training," he said.

In its skills report the EEF said that a shortage in both the number and quality of candidates for vacant roles could stifle growth in the UK manufacturing sector and prevent businesses from benefitting fully from advancements in digital technology.

EEF cited concerns raised by UK manufacturers in a survey about "recruitment difficulties" they currently experience and that they anticipate in future. According to the report, 72% of UK manufacturers are "concerned about finding the skills their businesses need" over the next three years. EEF's survey, conducted in October last year, gathered the views of 239 senior decision makers in UK manufacturing.

UK manufacturers said they expect demand for skills in areas like people management, leadership and IT and software to grow over the next three years, but said that in many cases at the moment job applicants lack technical skills, relevant experience or qualifications or are an "insufficient" in number.

"The main driver behind manufacturers’ recruitment difficulties is a lack of technical skills among applicants, cited by 68% of employers," according to the EEF report. "Employers also report that applicants lack relevant experience; this has increased to 61%, up from 57% in our 2012 survey."

"On top of this, the availability of candidates is increasingly becoming a problem, with almost two-thirds citing this as a reason behind their recruitment difficulties. It is a combination of the quality and availability of candidates that is leading to problems in recruitment, and why the proportion of hard-to-fill vacancies within the manufacturing industry has remained stubbornly high at 35%," it said.

Terry Scuoler, chief executive of EEF, said that manufacturers' skills problems are "likely to increase" in future. He said government-backed initiatives would be responsible for increasing manufacturers' employment costs.

"Skilled people are the lifeblood of manufacturing businesses, and without them our industry will struggle to lift itself out of a subdued period of growth," Scuoler said. "A combination of the new National Living Wage, the apprenticeship levy and the proposed immigration skills charge will create a large additional tax wedge and drive up the costs of employment in the UK. The challenges of finding, funding, retaining and training skilled workers are therefore all likely to increase in 2016 and beyond."

"While it is encouraging to see that businesses plan to continue to recruit apprentices and increase their training budgets in the coming years, my fear is that such plans may be pared back as employers feel the bite of additional costs introduced by government," he said.

EEF set out 10 recommendations to the UK government in its report to help manufacturers address the issue of skills.

It called on the government to promote the study of "technical subjects" in the field of science, technology, engineering and maths (STEM) in schools, and said secondary schools in England should be set a target of ensuring at least 10% of 'key stage 4' pupils – generally those aged between 14 and 16 – participate in a "quality, accredited apprenticeship in industry".

The government should also make it easier for workers from outside the European Economic Area who are skilled in STEM to gain employment in the UK, it said.

Manufacturers should also be allowed to continue to use 'zero hours' contracts, among other "flexible employment contracts", it said. These flexible contracts "can support employers to retain the specialist skills of older and former workers, often to work on niche projects, as well as assist entry-level employment by offering such opportunities as work experience for students and new graduates," the EEF said.

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