EMPLOYMENT levels will rise by 250,000 this year, according to a review of HR prospects by people management experts the Chartered Institute of Personnel and Development (CIPD).

The CIPD says this presents a huge dilemma to UK organisations that are already experiencing severe recruitment difficulties.

Either they will have to look to under-used sources of labour, such as immigrants or jobless people, or face wage costs increases next year.

John Philpott, the CIPD's chief economist, explained: "The selfemployed and the public sector are likely to be the biggest winners of the jobs increase next year.

"While this is undoubtedly good news for business and users of public services, it promises to present an even greater challenge to public sector HR managers who already report recruitment difficulties.

"To meet the challenge, UK organisations should tap into under-used sources of labour, or indeed raise productivity by improving skills in the workplace, to avoid a hike in wage costs in 2004."

Mr Philpott (pictured) argues that the more balanced pattern of economic growth will also favour job creation in business services and manufacturing, although it remains doubtful in the case of the latter whether the net effect will be positive.

He continued: "The pressures of a tight labour market and business upturn will challenge the increasing proportion of organisations with a written HR strategy to deliver on their strategic goals if they are to remain credible."

Recruitment and retention of skilled staff remains HR's biggest challenge. Nine out of 10 organisations attempting to fill vacancies reported difficulties in 2003, with almost three quarters also reporting difficulties in retaining their current staff levels.

The most common reasons for recruitment difficulty are skills shortages and finding applicants with suitable experience for the role.