November 2024: The Health Of The Permanent IT Recruitment Market

It won’t surprise anyone to hear me say that the 2024 permanent IT recruitment market has been rocky.

Since 2020, there have been multiple issues affecting the momentum of the permanent IT recruitment market. From workplace trends, such as working from home mandates during the pandemic, to the great resignation in 2021, big name mass redundancies across 2022-24, and return to office mandates becoming more prevalent in 2023 and 24. Then, socioeconomic factors, such as the pandemic, cost of living crisis, recessions, skills shortages, and elections, have all affected the UK job market.

The workplace has transformed significantly in the past few years and businesses are still struggling to steady themselves in the wake of these changes. Whilst, from the outlook of the last few months of 2024, the economy has started showing promise, many businesses remain understandably cautious.

The 2024 permanent IT recruitment market overview: 2024 so far…

Before discussing the health of the permanent IT recruitment market as we see it in November 2024, it is important to first understand what has been affecting the market up until now.

The economy

The economic climate of 2024 has created uncertainty in the market. Starting the year in a recession, Q1 2024 showed promise with a rise in GDP of 0.7%, effectively taking the UK out of the recession. However, statistics showed no growth in April and a more limited overall growth in Q2 2024 of 0.5%.

Despite interest rate cuts to 5% in August, many organisations have still been hesitant to invest in IT projects and long term employment. In fact, the ONS reported that vacancies across all industries continued to reduce in number throughout this year, and in October 2024, the ONS reported vacancies had retracted for the 27^th consecutive month.

Warnings of a ‘harsh’ budget and what it will mean for the economy, among other factors, have meant businesses have been cautious about hiring long term permanent employees in the second half of this year.

Election surprise

Even though a general election was always going to happen in 2024, there was a degree of surprise when it was announced for July of this year. On the lead up to the election, there was some uncertainty in the market, as there always is before a general election. This is due to concerns surrounding how a new government might affect the market and the economy, which will often impact how confident businesses are in making new hires.

Uncertainty around changes to Employment Law and how the economy fares all affect whether businesses feel they can budget for certain projects. Many were concerned about potential tax rises, National Insurance increases and other labour costs, which make hiring permanent employees more expensive.

The wait for the election halfway through this year and the anticipation for the Autumn Budget are just parts of why the permanent IT recruitment market has been low this year.

Confidence in the market

Whilst the mass redundancies we saw in 2022 and 2023 have slowed down, the effects of these vast number of layoffs have had far reaching consequences for the confidence in the job market this year.

The redundancies seen across the tech sector from companies such as Google, Microsoft and META, as well as countless smaller companies and startups, have seen over 570,000 employees made redundant since 2022. The reasons for such elevated levels of redundancies range from, hiring sprees during the pandemic, competitive recruitment leading to overinflated salaries, the switch in spending to AI projects, as well as recessions and economic stagnation.

The effects of such substantial numbers of redundancies have created scars across the permanent IT market. Organisations have been very sceptical and cautious around hiring permanent employees, especially if they could not promise long term employment.

In our talks with candidates, we have also found professionals who have survived 2-3 rounds of redundancy are also cautiously looking for new work, as they don’t feel secure in their current roles. Instead of their job searches focusing on higher paid work, many candidates are prioritising finding roles and companies that offer increased job stability and security this year.

The trends affecting the permanent recruitment market in November 2024

Supply and demand problems remain

The British Chamber of Commerce found that only 56% of companies attempted to hire in Q3 2024, the lowest number since the pandemic. This was particularly prevalent in IT, as discovered by KPMG’s research, which experienced the steepest drop in permanent vacancies in the IT sector in comparison to other industries.

In the run up to the Autumn Budget, businesses expressed concern and hesitancy to commit to spending plans that included recruitment. Companies have continued to delay hiring permanent employees, until the economic outlook is more certain.

This is contrasted with ever more increasing candidate availability. KPMG found that candidate availability rose for the 18^th successive month in October 2024. Candidate availability has increased partly due to redundancies, the rise of fixed term contracts, the threat of more redundancies, workplace changes with the rise of return to the office mandates, and a culmination of many months of reducing vacancies.

Overall, the market is complicated. IT workers with niche skills and great experience are still experiencing high demand and will find the job market easier. However, more saturated positions such as junior level employees or line support, are increasingly entering a more competitive market.

Rise in Fixed Term Contracts

At VIQU, we have seen a high increase in the offering of Fixed Term Contracts for permanent employees this year. This is undoubtedly due to uncertainty and caution in the market. The rise in FTCs shows that organisations need people and want to hire, but cannot commit to long term employment. In our conversations with clients, some have said they do not have definite forecasts around budget for the next 12-18 months, so they cannot commit to offering permanent employment and are instead favouring engaging IT contractors and fixed term workers for the short to medium term.

Growth in company benefits

For companies that have been hiring in 2024, the big focus for both organisations and candidates this year has been company benefits, rather than pay. Some companies cannot offer extremely competitive salaries for the talent they need, so they are having to assess their whole compensation package, particularly workplace benefits, which have limited costs.

Thankfully for them, candidates are no longer only looking at salaries but are often carefully considering benefits as well. Why? Benefits have been big news in the world of workplace culture in the past year. Larger organisations have expanded their company benefits to include health insurance, advanced parental leave, unlimited annual leave, fertility loans, and much more. These high-profile cases have led to some clients asking us to benchmark their salaries and benefits packages, to see how they fare compared with their competitors.

Candidates are starting to expect benefit packages that offer specific support around flexibility, fertility, health, and wellbeing. For businesses that can’t offer higher wages, benefits are a way to attract talent without breaking the bank.

Return to the office mandates

Reducing working from home and hybrid working flexibility has been an ongoing workplace trend in 2024 that will likely continue into 2025. A number of high profile organisations, such as Amazon, have asked their workforces to return to working onsite 5 days per week. Whilst many organisations are hesitant to push to 5 days onsite, even if they would like to, they are encouraging workers to return to the office for at least 3 days a week. In conversations with organisations, we’ve learned that it is something that is a significant topic amongst many business leaders, with a number preparing to enforce more days onsite in 2025.

The move to return to office working has caused some issues amongst employees who accepted roles on the promise of only needing to be physically present for limited days per week or month. With many organisations moving expectations to working in the office 2-3 times per week, some employees have felt blindsided and have considered looking elsewhere. Thus, further adding to candidate availability, turnover levels, and recruitment demand in the permanent IT recruitment market.

Autumn 2024 budget

The long-awaited Autumn Budget has just come to pass. For many, the good news is that it could have been worse…

The bad news is that there are increasing costs for employers that will affect their ability to commit to IT projects and workforce hiring. Rising Employer National Insurance from 13.8% to 15% will make already cautious business leaders think twice before hiring permanent additions to their workforce.

There had been plenty of rumours prior to the announcement of a much harsher budget, so there is some level of relief among organisations. Whilst this news will ease some uncertainty in the market of how the Labour government would change employment law and employment costs, it will be interesting to see how this will affect the permanent IT market in 2025.

VIQU is an award-winning IT recruitment agency. For tailored and specialist assistance in hiring great IT professionals this year or next, please get in touch with our team here.