Inflation, NI and an extraordinary talent landscape - tackling 2022 UK salary reviews in Life Sciences
For the benefit of our broad range of life sciences clients, Fact3 sat down with Giles Hampson, Managing Director of MedTech and Life Sciences specialist recruitment firm Recruitment Management Group (RMG) and Jayne Sanderson Brown, Fact3 People Partner to get their view on the market, and in particular 2022 salary reviews against a backdrop of a turbulent market that’s still in the midst of pandemic recovery.
To align with this conversation, Fact3 have produced an anonymised snapshot of salary review activity in the pipeline for this year across the sector as it’s been a hot topic for a number of our clients. We hope this snapshot will provide guidance and food for thought to help support you with this challenge. Access salary review stats here.
Could you provide an overview of the talent market in Life Sciences from Covid to today? (late Feb 2022)
The Life Sciences market in March/April 2020 was suppressed and struggling like many others with the rapid change and disruption brought about by the pandemic. Hiring freezes were immediately in place across many organisations and the willingness to move from candidates very quickly dried up as a knee jerk reaction to the stringent lockdown measures. Once the dust settled a little and some measures were lifted, we saw one of the busiest summers for recruiting ever, as a combination of market bounce back in hiring back was met with an increased ability of candidates, working from home able to entertain career opportunities much more readily and confidentially
A continuation of this trend through the remainder of 2020 and into 2021 resulted in a booming market. Companies who had held back on recruiting in 2020 had retained those budgets and released them in 2021, driving high levels of recruitment activity and movement of talent. This had an inflationary effect on salaries as there were simply far many more good jobs than good people to fill them.
The other impact of the pandemic was of course the great resignation. A lot of baby boomers began to exit the market, resulting in a dramatic increase of open senior roles such as CFOs and specialist R&D leaders, with a very limited succession plan in place. Due to the fact that Life Sciences as a market has been very “candidate driven” (supply and demand being in favour of the candidate / employee) , this combined with the increase in open senior positions has led to a trend of counter offers which have increased and increased, leading to an unstable talent environment across the sector.
What are the most critical People challenges you’re both seeing in the Life Sciences sector right now?
Salary increases – due to alarming predictions that inflation may increase to around 7-8% by April 2022, cost of living has shot up. Combined with the Health and Social Care Levy announced by the Government last year, meaning employers and employees will face a 1.25% increase in National Insurance payments from April 2022 onwards – salary increases have become a critical challenge for businesses in the sector. Lower paid employees may in some cases be forced to look for another, higher paying role if employers don’t match salary increases to cost of living fluctuations.
Skills shortages – the great resignation has driven major skills shortages in the sector, often at a senior level, resulting in unprecedented pay rises of 20-30%, pricing smaller businesses out of the talent market at the moment as they simply can’t compete.
Competition to retain the best talent – UK life sciences companies raised £10.6bn from private funding rounds and stock market flotations in the first three months 2021, more than half of 2020’s record total. This has led to a lot of movement in the talent market, driving up competition to retain the best talent, meaning employers have had to start implementing increasingly creative retention strategies.
Lack of succession planning – what a number of businesses have quickly realised is a renewed focus on succession planning is required, especially for senior or specialist roles to avoid very high levels of spend on salary to backfill talent quickly in order to avoid a drop in productivity.
What are business across the sector doing about salary reviews this year?
Rising energy prices and fuel costs have been the biggest factors in driving inflation up to near 30-year highs with predictions of 7-8% by April, though the price of food, drink and many other everyday essentials have also been on the rise. Combined with the Health and Social Care levy increasing NI by 1.25% for employers and employees, and a highly competitive talent marketplace in the Life Sciences and Biotechnology sector, employers are in a challenging position when it comes to committing to salary increases and retaining talent. This has all been made even more unstable by Russia’s invasion of the Ukraine, and might mean inflation remains higher for longer.
There are conflicting views at a Governmental level, with Andrew Bailey, Governor of the Bank of England urging restraint on pay increases, arguing that sudden large scale wage increases will contribute further to economic pressures, but Chancellor of the Exchequer Rishi Sunak claiming advice on employee/employer wage conversations shouldn’t be made political as he increased national living wage from £8.91 to £9.50 per hour. However, the reality is that as the cost of living increases, lower paid workers simply can’t afford to stay in roles that don’t meet cost of living so competitors will have the opportunity to poach staff at this level if the business won’t meet demands.
This has meant we’ve seen a trend of higher salary increases for lower paid roles of 6-10%, with middle management and above receiving a standard 2-3%.
Due to the rapid increase of investment in the sector over the last 12-18 months, and the increasing competition for talent, larger businesses have been able to afford up to a 19% increase to retain talent – but this won’t be the case for most so creative use of benefits packages, share options flexible working and company culture is more important than ever.
It’s also worth mentioning that yes, there has been a huge spike in the cost of living and the NI increases, but businesses need to carefully consider the impact of a high wage rise right now on the future when inflation once again reduces and balance is restored. There’s also a question of ethics, when it comes to paying the price of macroeconomic factors like the impact of the pandemic, should businesses be responsible for covering costs on behalf of staff? Businesses need to be careful not to over commit to high levels of long term salary expenditure that won’t be sustainable once the spike has fallen again.
View Fact3’s 2022 UK Life Sciences and Biotech Salary Review Snapshot
How can businesses mitigate the 1.25% increase in NI as a results of the Health and Social Care levy?
The national insurance increase wilI affect employers and employees as it requires a 1.25% contribution from both sides. In a snap poll with CIPD members, 74% said they expect an increase in business costs as a result of the levy, so it’s important they find efficiencies in other areas. With hybrid and flexible working now a requirement for employers who want to attract great talent, company travel costs should be significantly reduced over the long term and there are opportunities for businesses to lessen the impact of the lev by bringing forward planned dividends to the current tax year or offering employees salary sacrifice or share option schemes.
Have you seen any new trends during and post Covid in the way business recruit talent?
Increase in post offer rejection – with more and more recruitment processes happening end to end online, the hiring process has in theory at least become really efficient. An unintended consequence of this efficiency however is that candidates are less engaged with the process with more candidates getting through to offer stage, then declining. The physical commitment of face to face interviews and more involved preparation pre pandemic was actually a very handy screening tool when it came to identifying serious candidates.
Self-worth - talent has been increasingly approached with new opportunities in this sector in particular, so they have developed an understanding of their value to an employer which has led to certain non-negotiable demands.
Work life balance - has become a top of the agenda item when employees are considering an offer. Employers have to define and communicate their remote, hybrid and flexible working arrangements, as well as finding ways to maintain a strong company culture with a disjointed workforce.
Geography - Companies in the North of England have seen a trend of talent being lost to London based businesses that are happy to pay a higher London wage, but without the expectation that the candidate relocate due to the trend for remote working.
Apprentices and talent development - niche sectors in particular have a very limited professional talent pool and they’re all at a massively high price point so they have started to invest more in apprenticeships and internal training for these roles.
Do you have any predictions for this year and beyond?
The market is unlikely to remain as wildly buoyant as it has been, and inflation will settle down at some point so it’s wise to exercise caution when considering salary uplifts. Massive hiring activity in the recruitment market like we saw in 2021 is unlikely to be replicated this year, and there may be a slow down in investment in comparison to what we saw in 2021 as other sectors begin to bounce back. Non of which is a negative, there’s still lots of activity, it’s just that the extreme peaks and troughs are coming to an end and the market is likely to level out a bit over the next 12 -18 months so I think we can expect a steadier 2022.
Do you have a message for talent in the sector?
Yes, it’s totally understandable that employees would be tempted to move for the dangling carrot of seriously high wage increases. However, we’d urge employees to carefully consider staying or moving for the right reasons. Because of high attrition rates in the sector, employers are increasingly rewarding loyalty and thanks to the great resignation, there are increasing opportunities for rapid career progression and additional training, so make sure you have a clear understanding of the future talent strategy of your current and new employers.
For more information on 2022 UK Salary Review activity across the Life Sciences and Biotechnology sector take a look at the Fact3 snapshot here - using data gathered anonymously from Fact3’s Life Science and Biotech network.
If you have further questions on this subject, don’t hesitate to contact us at hello@fact3.co.uk.