Impact of the Autumn Budget on Employer Costs and Hiring in the UK Labour Market
Labor market statistics for August 2025: REC's reaction
The Autumn Budget of 2024 has introduced several measures that have significantly impacted employer costs and hiring trends in the UK labour market, amidst an uncertain economic environment and sector-specific challenges.
Employer Costs
The changes in the budget have had a substantial impact on employer costs, particularly for labour-intensive sectors.
- National Insurance Contributions (NICs): The employer NIC rate has increased from 13.8% to 15%, affecting Class 1, Class 1A, and Class 1B NICs. Additionally, the secondary threshold for employer Class 1 NICs has been reduced from £9,100 to £5,000 annually. This change adds significant costs, particularly for the retail sector, potentially increasing costs by £2.7–4 billion.
- National Minimum Wage (NMW) and National Living Wage (NLW): Both have seen significant increases, with the NLW rising to £12.21 per hour from £11.44. This places additional pressure on businesses reliant on lower-paid staff.
- Business Rates: Reforms have led to increased liabilities for commercial properties, affecting sectors like retail, hospitality, and logistics.
- Energy Costs: The reduction in temporary relief schemes for business energy bills exposes companies to higher market prices, adding to operational costs.
Hiring Trends
- Labour Market Challenges: The increased costs from NICs and wage hikes have led some businesses to explore outsourcing and offshoring to mitigate rising employment costs. Concerns about the Employment Rights Bill have also added to the uncertainty, with businesses anticipating additional administrative burdens.
- Job Postings: Despite a decline in new job postings by 11% in July 2025 compared to the previous year, the labour market remains active, with opportunities in sectors like engineering and technology.
- Industry-Specific Trends:
- Retail Sector: Facing significant challenges due to increased NICs, wage hikes, and business rate reforms, which threaten profitability and could lead to store closures.
- Manufacturing and Services: These sectors are also affected by the changes in NICs and wage rates, with concerns about the impact of the Employment Rights Bill.
In summary, the Autumn Budget has increased employer costs across various sectors, leading to a cautious hiring environment. Businesses are adapting by exploring external options and advocating for policy stability to support growth.
- Businesses cannot afford further cost rises.
- The number of people in work slightly increased in the latest official statistics.
- The goal of the current government is to achieve 80% employment.
- The construction and blue-collar industries are showing a gentle return to hiring.
- Sustained demand for engineering skills is present in the labour market.
- The official statistics do not specify the current employment rate.
- In the wake of the Autumn Budget's cost increases for employers, particularly in labor-intensive sectors, there's growing apprehension among businesses about further rises being unaffordable.
- Despite the questioned employment rate and the uncertainty brought by the Employment Rights Bill, the latest official statistics show a slight increase in the number of people employed, while the construction and blue-collar industries are showing signs of a gentle return to hiring. Additionally, the labor market continually exhibits sustained demand for engineering skills.
