While hiring remains relatively stagnant in the UK, pay growth rose for both permanent and temporary workers last month as employers continued to compete for skilled candidates.
Last month’s increase in starting salary growth was the highest in nearly 18 months, according to the UK Report on Jobs by KPMG UK and the Recruitment and Employment Confederation (REC).
Starting salaries increased for permanent staff in January at the quickest pace since August 2024, climbing for the fourth consecutive month in the report’s Permanent Salaries Index, from 53.1 in December to 54.2 in January.
Temporary pay rates also increased last month. The report’s Temporary Wages Index registered a significant rebound in temporary pay growth, rising from 51.0 to 54.4. An index reading of 50 is considered neutral.
Corresponding to initiatives from employers to raise starting salaries, average pay rates for temporary roles also rose because of competition for in-demand skills, according to the recruiters surveyed.
Conversely, the UK’s outlook on hiring is mixed as low economic confidence persists.
Permanent placements declined further in January amid reports of generally weak market conditions and employer concerns over costs. Vacancies continued to decline sharply, albeit at a slightly slower rate than in December.
Nevertheless, the report noted that the pace of reduction in permanent hiring eased to the weakest in 18 months and found that temporary billings increased in January after falling in the previous two months.
After a difficult end to last year, it’s encouraging to start this year with tentative signs that hiring appetites are beginning to improve, Lisa Fernihough, head of advisory at KPMG UK, said in the report.
“Skills shortages in specialist areas continue to impact the market, particularly where competition for talent remains intense,” Fernihough said. “There are parts of the economy poised for investment, and as skills needs align with greater market stability, we could start to see more consistent improvement in hiring as the year progresses.”
Subsequently, staff availability slowed last month. The latest data pointed to a particularly marked reduction in permanent candidate numbers compared with December levels. Overall, the Permanent Staff Availability Index fell from 66.3 in December to 58.1 in January, the report said, marking the softest increase in candidate supply in a year.
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