Full Breakdown
Rising Employment Costs and Recruitment Slowdown in the UK
9/12/2025, 12:41:26 PM
Overview of Employment Cost Increases
In June 2025, employment costs in the UK rose by 4.8% compared to the same month in the previous year, according to data from the Office for National Statistics (ONS) and His Majesty’s Revenue and Customs (HMRC). Employers paid a total of £111 billion in gross salaries and employer national insurance, marking an increase of £5.1 billion. This rise in costs coincided with a reduction in the national workforce, where the number of payrolled employees decreased by 149,937, or 0.5%, from June 2024 to June 2025. The decline was attributed to a higher number of leavers (7,296,859) compared to joiners (7,146,922), indicating a challenging economic environment.
Salary Trends and National Insurance Changes
The average salary increased from £3,176 in June 2024 to £3,291 in June 2025, reflecting a 3.6% rise. The median monthly salary also saw a significant increase of 5.9%, from £2,389 to £2,530. Notably, the national minimum wage increase in April 2025 contributed to higher salaries for lower-paid workers. Additionally, changes in employer national insurance contributions, effective from April 2025, raised the rate from 13.8% to 15.0% for salaries above £417 per month, further escalating employment costs.
Recruitment Challenges and Economic Context
The UK is experiencing one of the sharpest recruitment slowdowns globally, with only 11% of businesses planning to increase headcount in the final quarter of 2025, according to ManpowerGroup’s Employment Outlook Survey. This represents a 17 percentage point decline from the previous year, the steepest drop among 42 countries surveyed. Factors contributing to this slowdown include rising operational costs, increased employer national insurance contributions, and broader economic uncertainty. The CIPD reported that the cost of doing business has risen significantly, impacting hiring intentions.
Sector-Specific Impacts
The recruitment slowdown is not uniform across sectors. While technology, finance, and property sectors maintain stronger hiring demand, industries such as hospitality, retail, and social care face the greatest challenges. Employers are adjusting their workforce strategies, often opting for flexible hiring arrangements or pausing recruitment altogether. Many firms are focusing on business-critical roles or replacing leavers, leading to fewer opportunities for job seekers.
Criticism and Calls for Action
Critics argue that the government's policy decisions have not alleviated the pressures on businesses. Experts suggest that relief on employment costs and clarity on policy timelines are essential for improving hiring conditions. The ICAEW has called for the government to streamline regulations and reduce unnecessary costs to foster a more conducive business environment.
Verbatim Quotes
- “The UK economy has stalled and with it so has hiring,” — Petra Tagg, Workforce Solutions Director, ManpowerGroup
- “The cost of doing business has increased notably over the past few years, and policy decisions made by the government in its first year in office have done little to mitigate this, leading to weaker hiring intentions.” — James Cockett, Labour Market Economist, CIPD
- “Employers are treading carefully, with increased use of temporary contracts, internal mobility and upskilling – not just as cost measures, but to protect agility.” — Gemma Dale, Lecturer, Liverpool John Moores University
Conclusion
The combination of rising employment costs and a significant recruitment slowdown poses challenges for the UK economy. As businesses navigate these pressures, the need for strategic adjustments and government support becomes increasingly critical to foster a resilient labor market.
