How have the increases in employment costs affected wage growth and hiring?

When the Chancellor unveiled £26 billion in additional taxes and higher employer National Insurance contributions (NIC) last autumn, the impact on business confidence was immediate.

Businesses are now trying to manage:

• The new adult National Minimum Wage rate, which has risen to £12.21.
• A 1.2 per cent rise in employer NIC.
• Statutory pay increases and extended family leave entitlements.

For labour-intensive industries such as retail, care, and hospitality, these measures pushed up employment costs by several percentage points almost overnight.

Is wage growth under pressure?

While mandated pay increases have provided a short-term boost to lower earners, broader wage growth is stalling.

A new survey prepared by the Recruitment and Employment Confederation (REC) points to starting salaries rising at the slowest pace in over four years.

Payroll budgets have been squeezed to the point where wage increases above statutory minimum are rare.

Between redundancies, job moves, fewer vacancies and career changes, there are more applicants in the job market for employers to choose from.

That supply-demand imbalance has eased pay pressures further, particularly outside specialist and technical fields.

Are businesses reluctant to hire?

The Chartered Institute of Personnel Development reports that only 57 per cent of employers plan to recruit in the next three months, down from 65 per cent just last autumn.

Vacancies for permanent roles may have decreased, but temporary and flexible contracts are helping to fill some of the gaps. However, this reflects caution rather than expansion.

Many businesses are delaying investment until there is clarity on future tax policy in the next Autumn Budget.

What it means for you

Balancing compliance with competitiveness is now a key challenge for employers.

We are working alongside businesses like yours to help forecast the impact of different payroll scenarios on short-term profitability.

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